Low electricity prices result in Taipower losses
By John Liu, The China PostTAIPEI, Taiwan -- Taiwan Power Co. (Taipower) Chairman Hwang Jung-chiou (黃重球) said yesterday that the company has a total deficit of more than NT$200 billion due to Taiwan's low electricity prices failing to reflect rising operation costs.
August 29, 2013, 12:22 am TWN
Kuomintang Legislator Lo Shu-lei (羅淑蕾) recently accused Taipower for failing to overhaul and improve the company's operations, adding that Taipower not only continued to incur losses, but also benefited private electricity companies with its business operations.
Lo said that despite the fact that electricity prices were hiked in June 2012, Taipower's losses have continued to rise. While Taipower incurred hundreds of billions of New Taiwan dollars in losses, private utility companies accumulated profits equivalent to NT$100 billion. It showed that Taipower has overpaid private utility companies through its contracts, according to Lo.
Taipower's Rising Costs
Taipower held a press conference yesterday to deny Lo's allegations.
International fuel prices began rising in 2003, raising Taipower's operation costs, Hwang said, adding that the company started to incur losses in 2006, and annual losses amounted to nearly NT$100 billion in 2008.
Hwang said that Taipower buys electricity from private utility companies through contracts, and private utilities have profited about NT$120 billion over the past decade. On average, each utility company makes NT$1.3 billion per year. Nevertheless, their return on investment is only 4.3 percent as each utility company has made an average investment of around NT$30 billion.
Hwang stressed that Taipower suffered losses because domestic electricity prices did not reflect rising international fuel prices, and it had nothing to do with private utility companies making profits. The planned electricity price in October aims to reflect the increased costs, Hwang said.
Taipower's Operation Overhaul
Taipower has been overhauling its business operations and is saving NT$1.54 billion per year on electricity purchases from private utility companies, according to Hwang, adding that the company will strive to develop new revenue sources while reducing operation costs.
In an effort to further reduce operation costs, Taipower has also laid off 5,074 people since 2000. The proportion of funds directed toward employee welfare funds has also been cut by 45 percent, Taipower said.
In light of equipment phase outs due to age in several plants, Taipower is building new facilities. However, due to inflation and environmental protests causing construction delays, costs for building new facilities have increased, and Taipower must now take out loans for construction, the company said.
Electricity Price Hike
The government is raising electricity rates to help Taipower cope with losses caused by low rates that do not reflect operating costs. The Cabinet announced last year that electricity rates would be increased in three phases.
The Ministry of Economic Affairs announced on Tuesday that the second-phase price hike would be lower than originally planned. Hwang said yesterday that the reduced price hike would not help Taipower recover the company's losses.
He added that he did not know how the third-phase hike would be implemented as the price hike is to be determined based on the performance of Taipower, which he considered ambiguous.
Prices were increased by 40 percent on June 10, 2012 as the first step in the three-phase price hike. The second phase of another 40-percent increase was scheduled to be implemented on Dec. 10, 2012 but was postponed to Oct. 1 this year. The timing of the third phase — a 20-percent hike — will be determined based on the performance of Taipower.