Wed, Mar 14, 2001 page18

• Taipower says prices to be reviewed in three months

  ENERGY PRICES Company officials are well aware of the resistance to raising the cost of electricity both inside and outside the halls of the legislature. Nontheless, it is making it known that the time for an increase is rapidly approaching

  • STAFF WRITER
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  The Taiwan Power Company (台電) is considering raising electricity prices to bolster profits that have diminished rapidly due to the rising cost of oil and natural gas, according to senior executives.

  But opposition to pushing up power prices is strong among lawmakers of all stripes, according to one analyst, who predicts that the 18-year absence of electricity price hikes won't come to an end this year.

  Taipower chairman Hsi Shih-ji (席時濟) told lawmakers on Monday that Taipower will evaluate the impact of rising crude oil and natural gas prices on company profits within three months.

  Hsi explained that Taipower had failed to meet the NT$54 billion profit forcast set for the period between mid-1999 to 2000. Instead, the company had only generated NT$51.9 billion, he said.

  Subsequently, Taipower has chopped its profit forcasts for fiscal 2001 to NT$26 billion and a staggering 91 percent down from 1999 to NT$4.5 billion in 2002.

  The state-run utility is legally bound to meet profit targets that are negotiated every year between government officials and company executives.

  Local media have speculated that electricity prices would have to be hiked by more than 6 percent to return Taipower's profits to last year's levels.

  Other Taipower executives said that while a price rise in three-month's time was certain, there certainly wouldn't be any rise before that time.

  But according to Teresa Chou (周美惠), an energy analyst at Taiwan Ratings (中華信用評等), while an electricity price hike may be sorely needed for Taipower to offset rising costs, achieving one is difficult to achieve.

  Politically, any motion to raise prices is "very unpopular," said Chou. "Every year there are calls by Taipower to raise the electricity prices but it hasn't happened in the last 18 years," she said.

  Chou explained that, although unpopular, Taipower is legally entitled to raise the tariffs on electricity prices if the company's rate-of return falls below 9.5 percent. If the rate rises to above 12 percent, the company is legally bound to drop power rates, she said.

  One of the major reasons for Taipower's shrinking profits basically is the result of the of its inability to pass on the rising costs of purchasing power from Independent Power Producers (IPP) to customers, said Chou.

  Last year Taipower bought 6 percent of its total power output from IPPs, but that number is set to grow significantly after the government further opens the power producing market this year.

  Taipower signs power purchase agreements with the IPPs guaranteeing it will purchase a set amount of power from them, said Chou. But the pricing can be altered to meet market costs for oil and liquid natural gas, which have risen sharply recently.

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