Electricity rates and inflation might rise after NT$100 billion (US$3.42 billion) of subsidies for state-owned Taiwan Power Co (Taipower) on Friday were excluded from a special bill, the Executive Yuan said.
The Ministry of Economic Affairs might approve a hike in power rates at an electricity rate review meeting, as Taipower failed to secure the subsidy, Executive Yuan spokeswoman Michelle Lee (李慧芝) said in a statement after the legislature approved the bill minus the funds.
A rate hike could push up inflation, affecting consumers and the industrial sector, Lee said.
Photo courtesy of the Executive Yuan
A review meeting has been scheduled for September, after which Taipower would report its financial situation and seek aid from the government, the company said.
Chinese Nationalist Party (KMT) lawmakers pushed for the removal of the subsidy from the special NT$545 billion package.
The special act would allow the government to use surplus tax revenue to invest in Taiwan’s security infrastructure and provide relief to industries likely to be affected by US tariffs.
Domestic power rates would be increased to make up for the loss of the subsidy, Taipower said.
Taipower’s accumulated losses hit NT$422.9 billion as of the end of last year, largely due to a surge in fuel costs, ministry data showed.
As electricity rates were not increased at the previous review meeting in April, the ministry said that Taipower is expected to incur an additional NT$33.2 billion in losses this year.
Opposition lawmakers have repeatedly said that the large losses posted by Taipower are a result of the government’s failed energy policies, including the phaseout of clean and more affordable nuclear power, and the purchase of renewable energy from the private sector at unreasonably high prices.
Paul Hsu (許舒博), head of the General Chamber of Commerce of the Republic of China, said a possible hike in power rates resulting from the removal of the subsidy could deal another blow to the local economy, which faces pressure from uncertainties created by the US’ tariff policies and gains by the New Taiwan dollar against the US dollar.
Higher electricity rates, along with potential new tariffs imposed by the US, are expected to raise production costs and lower the competitive edge of local industries, particularly old-economy sectors, Hsu said.
The Taipei-based Chinese National Federation of Industries, another major Taiwanese business group, before the review of the special bill on Friday said that the group and its counterparts had urged the Legislative Yuan to approve the subsidy by taking into account the power supplier’s difficult financial situation.
The NT$100 billion subsidy, which the government proposed, aimed to improve the company’s financial structure, ease the pressure to increase electricity rates, as well as on inflation, and protect the public’s interests, the industrial sector and the overall economy, Lee said.
Taipower staff have been working hard to fix infrastructure damaged by Typhoon Danas, which hit Taiwan on Sunday, she said, adding that Premier Cho Jung-tai (卓榮泰) expressed regret about the failure to secure the financial aid and hoped its personnel would not be discouraged by the decision.
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