The Cabinet and the legislature must collaborate to solve Taiwan Power Co’s (Taipower) financial problems to avert more electricity rate hikes from April after a NT$100 billion (US$3.1 billion) subsidy was cut. Further electricity price increases would add to Taiwan’s already high inflation and put more financial burden on people and businesses.
The cancelation of the funding for Taipower was part of the record-breaking budget cuts totaling NT$207.5 billion pushed through the legislature on Jan. 21 by opposition parties the Chinese Nationalist Party (KMT) and Taiwan People’s Party. Another NT$100 billion added for Taipower’s 2024 budget plan was also removed. The funding is crucial for the state-owned utility to stay afloat, while keeping electricity rates steady, particularly for households. Taipower had accumulated NT$429.9 billion in losses as of the end of last year, as the company has been supplying electricity at prices below cost after global natural gas and coal prices soared following Russia’s invasion of Ukraine in February 2022. The utility’s net debt ratio has climbed to more than 90 percent, putting it on the brink of bankruptcy.
Taipower is scrupulous about price hikes to help stabilize inflation, although the costs of imported raw materials have been surging. Over the past three years, Taipower has increased electricity rates 66 percent for industrial users, but only 7.1 percent for the average household. The hikes were much slower than in most countries. South Korea raised electricity rates by 87 percent for industrial users and 49 percent for average household users during the three years ended on Dec. 31 last year, data provided by Taipower showed. The utility attributed massive losses to its low increases for households. It said it is losing NT$1 per kilowatt-hour. The company has absorbed NT$280 billion in losses from 2022 to last year supplying power to households, it added.
Without the NT$100 billion government subsidy, Taipower has to count on itself to improve its financial situation and to prevent insolvency. Raising electricity rates is one of the most effective approaches it has. To reach the break-even point this year, it would have to increase utility prices by at least 9 percent from April based on the company’s calculations. Unlike previous rounds of rate hikes, household users would not be exempted this time. The company expects its losses to widen further next year and in 2027, if it keeps power rates relatively flat for industrial and household users.
General Chamber of Commerce chairman Paul Hsu (許舒博) called on the government to work on a new budget to level off Taipower’s losses as electronics companies have been facing heavy utility costs, not to mention the public. He also said that higher power bills would boost inflation and make it difficult for the government to keep it below its 2 percent goal. Inflation was at about 2.66 percent last month, Directorate-General of Budget, Accounting and Statistics data showed. Every 1 percent increase in utility prices for households would add 0.012 percentage points to the nation’s full-year inflation, the agency said. The effect would be greater — adding 0.026 percentage points — if the price increases apply to industrial users.
Hsu is one of the industrial representatives to the electricity price review committee. It is to discuss the power rates by the end of next month. Utility hikes should be a last resort, as that would create a lose-lose situation for Taiwan’s economy, people and businesses. The optimal remedy now appears to be a new budget plan from the Cabinet and a legislature willing to give up any political maneuvering to approve it to benefit everyone.
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