During typhoons, Taiwan Power Co (Taipower) employees brave the rain to carry out urgent repairs and maintain stable electricity supply, demonstrating their professionalism.
The opposition alliance of the Chinese Nationalist Party (KMT) and the Taiwan People’s Party on Friday last week scrapped a NT$100 billion (US$3.4 billion) subsidy for Taipower, but passed the third reading of a special relief package, allocating NT$235 billion for a universal NT$10,000 cash handout, which the Democratic Progressive Party called a bribe to save KMT lawmakers from the upcoming recall votes.
This decision has exacerbated Taipower’s already dire financial situation. Taipower has accumulated losses totaling NT$400 billion, and its debt ratio is approaching 90 percent, posing serious threats to its international credit rating and operational viability.
One of the main causes of Taipower’s mounting losses is the sharp rise in global energy prices following Russia’s invasion of Ukraine in 2022, which has not been reflected in domestic electricity tariffs. As a state-owned enterprise, Taipower should be managed based on professional principles, rather than as a bargaining chip subject to political struggles.
This is an opportune moment to rethink the design of the electricity pricing system. Lessons could be drawn from Taiwan’s fuel price and public bus fare mechanisms. Since 2006, Taiwan has implemented a floating pricing system for fuel that adjusts retail prices based on international crude oil prices and foreign exchange rates, effectively minimizing political interference. Although there were many doubts and controversies in the early stages, the system has become widely accepted, and fuel prices are no longer subject to political manipulation.
The Taipei bus fare system also offers a valuable model. The “operating fare” is calculated based on the operators’ costs and a reasonable profit margin — about NT$25 per fare zone — while the actual “ticket fare” is set at NT$15 to ease the financial burden on the public. The difference is subsidized by the city government in accordance with the law. This model enables sustainable operations, ensures quality service and dense route coverage, and creates a win-win-win scenario for the public, the operators and the government.
A similar approach could be applied to electricity pricing. A two-tier pricing model could be introduced:
The “generation cost rate” would be calculated based on the fluctuating prices of international energy sources such as natural gas, coal and oil, reflecting actual generation costs.
The “end-user tariff” could be adjusted based on considerations such as livelihoods, industry and environmental policies, with the government subsidizing the gap between the two rates.
Such a system would protect Taipower from falling into a financial crisis due to frozen electricity prices. The government could also strategically provide targeted subsidies — for example, to disadvantaged people or charity organizations. This approach would promote social equity and sustainable development. Furthermore, it would provide clear performance metrics for Taipower, encouraging cost control and greater efficiency in power generation.
When discussing Taipower’s electricity rates, opponents of government subsidies often argue that the solution lies in restarting nuclear power plants and abandoning green energy. This view overlooks the global trend toward energy transition and Taiwan’s unique geographic advantage — Taiwan has one of the best wind farms in the world. Wind and solar power are developing, with promising futures ahead, so they deserve continued support, not premature abandonment.
Taiwan’s decommissioned nuclear reactors are based on outdated designs, and the problem of nuclear waste disposal remains unresolved. These are fundamental obstacles preventing nuclear power from serving as a primary energy source. If future generations of nuclear technology can truly resolve safety and waste issues, the discussion could be reopened. However, at this stage, a hasty restart would only pass the risk on to future generations.
Normalizing the electricity pricing mechanism — just as fuel and bus fare systems have been institutionalized — is the key to removing political interference. By letting generation costs be calculated professionally, setting electricity tariffs with due regard to public affordability and having the government legally cover the shortfall, Taipower’s finances could stabilize, and its structural problems addressed at the root.
Wang Chih-chien is a distinguished professor at National Taipei University’s Graduate Institute of Information Management.
Translated by Lin Lee-kai
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