Fuel and Electricity Prices: Scrutinize the System Before Raising Prices

Fuel and Electricity Prices: Scrutinize the System Before Raising Prices
United Daily News editorial (Taipei, Taiwan, ROC)
A Translation
July 9, 2008

Summary: Taiwan's electric power industry and oil industry are structured irrationally. The main reason is the government subsidizes state-owned energy companies. Under such protective umbrellas, Taipower and CPC have no competition. They need not worry about cost-savings or wasteful expenditures. They willingly accept unreasonable policies, subsidies, and expenditures because any deficits can be passed on to consumers. If profits are below expectations, they need not ask themselves whether their operations are efficient or their costs are reasonable. Price increases are the simplest, most expedient way of solving their problems.

Full Text below:

In July, both fuel and electricity prices increased, fuelling the threat of stagflation. Ordinary people's cost of living increased. But the energy policy of the Ministry of Economic Affairs, the Executive Yuan, even President Ma's inner circle, has so far been merely to toss the people a bone, to offer them a few energy-saving incentives. These consumer-oriented measures are necessary and important. But they do little to ease severe pressure on energy supplies and prices. Reforms must be supply-side oriented to play a real role. This includes the liberalization of the electric power industry and the rationalization of oil prices. For decades the government has done nothing. It has been derelict in its duty.

Taiwan's electric power industry and oil industry are structured irrationally. The main reason is the government subsidizes state-owned energy companies. Under such protective umbrellas, Taipower and CPC have no competition. They need not worry about cost-savings or wasteful expenditures. They willingly accept unreasonable policies, subsidies, and expenditures because any deficits can be passed on to consumers. If profits are below expectations, they need not ask themselves whether their operations are efficient or their costs are reasonable. Price increases are the simplest, most expedient way of solving their problems.

Consumers who have been abroad must remember seeing Exxon, Texaco, Shell, and other service stations at every major urban intersection. These gas stations compete not only over price, but also service. But on Taiwan, besides China Petroleum, there is only Formosa Plastics. These two oil companies control every gas nozzle on Taiwan. Taiwan is the only region in Asia with no access to foreign oil companies. Taiwan's two oil companies have always had an "understanding" regarding price increases. The two compete you say? Consumers don't think so.

Taiwan's two oil companies have so far avoided giving the public the impression they are in bed together. But they operate within an environment of guaranteed profits. Their cavalier indifference to operating costs was made abundantly clear when the former DPP government froze gas prices. When gas prices were frozen, China Petroleum was able to supply the domestic market by itself. This showed that a considerable percentage of the two oil companies' refining capacity was normally idle. If Taiwan's oil market had free competition, how could it tolerate so much idle equipment? How could consumers obediently accept higher gasoline prices?

The electric power industry's monopoly is even more serious than the oil industry's. Taipower's activities include power generation, transmission, and distribution. Its "Four in One" business model for all forms of electricity is long out of date. In fact Taiwan has about two dozen private power plants. But electric power industry regulations require Taipower to purchase privately-generated electricity at regulated prices. As a result, Taipower and private power plants are not competitors, but partners. This guarantees that the consumer gets exploited.

Taipower's "Four in One" business model has fallen far behind global trends within the electric power industry. These include demands for economic liberalization, increased efficiency and safety, and reduced waste. The Ministry of Finance knows that only a economically liberalized, competitive environment can lead to cost consciousness and efficiency. Only economic liberalization can provide high quality electric power service to households at a reasonable price. But 10 years of liberalization later, it has still taken no action.

Take the Eastern Interconnected System in the United States for example. Over a hundred private power plant managers must accurately estimate fuel prices, personnel costs, the probability of natural disasters, even such variables as industrial sabotage, months in advance. They must make a detailed accounting of costs to keep prices low, in order to be awarded contracts to supply electricity to the Public Utilities Commission. On Taiwan, meanwhile, profits are guaranteed. No one competes to supply electric power. Electricity prices are determined by politics and not by technical expertise.

We all know that in recent years Taiwan has experienced an over-supply of electricity due to industrial outsourcing. Yet the irrational policy of granting special concessions and purchasing electricity from private sector power plants has continued unabated. Taipower has revealed their contempt for consumers by reflexively passing these expenses on to consumers.

Taipower spends nearly 10 billion a year constructing steam and electric cogeneration, wind, and private sector renewable energy power generation plants at preferential prices. These account for over one-fifth of Taiwan's total electrical generating capacity. In order to purchase this electricity legally, Taipower has reduced utilization of its own power generation equipment, or even idled it, resulting in an incalculable waste of hardware. On the other hand, well-heeled private sector power plants use their own lower-cost electricity at peak hours. Off-peak electricity is sold to Taipower at high prices. Since the selling price is guaranteed, why not make the most of it? To make matters worse, Most of the privately-operated steam and electric cogeneration power plants do not use natural gas or other clean energy. They use low efficiency, low-cost, low-yield coal-fired or oil-fired units. Very little waste heat is recovered. The more electricity they generate, the more harm they inflict upon Taiwan's environment.

Taiwan's consumers are of course aware of the grim nature of the energy supply problem. They know the increased costs must be borne by all. But the government must ensure that fuel and electricity prices remain reasonable. They must not treat the people like ATMs, forcing consumers to bear unreasonable costs.

油電事業建制應先檢討再談漲價
【聯合報╱社論】
2008.07.09 02:48 am

七月油電雙漲，助長停滯性通膨威脅，普羅百姓生活負擔更形加重。但管能源政策的經濟部、行政院，甚至更上層的馬核心，迄今只祭出對民眾「利誘」的一些獎勵節能措施；這些寄望「消費端」的措施雖然該做也重要，但對緩解能源供應的嚴峻及價格壓力卻是作用有限。真正能發揮作用的，是在應當大力改革「供應端」，包括電業自由化、油價結構合理化等，幾十年來政府卻迄無動作，這是政府的失職。

台灣的電業、石油業建制及結構的不合理，關鍵原因出在政府基於歲入考慮，以法律保障國營能源事業收益；在這個「保護傘」的庇蔭下，台電及中油的經營不需要面對競爭，不需要撙節開支或在意成本浪費，對不合理的政策補貼支出也「欣然」接受，只因為赤字可以完全轉嫁給消費者；利潤未達預期，不必檢討經營是否得法或成本是否合理，漲價是最便捷、簡單的方法。

出過國的消費者一定有這個印象，國外城市路口有一家艾克森美孚加油站，緊鄰一定有德士古、殼牌石油等的加油站，不同品牌的加油站不但價格競爭，還有品質競爭。但在台灣，除了中油，就是台塑，兩家油商控制全台加油槍，台灣幾乎是亞洲唯一沒有外國油商進入、競爭的國家；於是，台灣唯二的油商，總是「默契十足」的漲價幅度與時間，說兩者是競爭關係，恐怕消費者不會同意。

台灣兩家油商雖一再迴避外界「哥倆好」的印象，但保證收益的經營環境，卻因先前民進黨政府油價凍漲，完全暴露出習於安逸、不在乎成本的經營心態。試想，油價凍漲期間，中油即可獨力應付國內油品市場供應，這豈不顯示平常兩家油商相當比例的煉油設備是閒置狀態？如果台灣的油品市場是自由競爭環境，哪裡會容忍設備大量閒置，消費者又豈會莫名所以地乖乖接受高油價？

電業的壟斷較石油更嚴重，台電囊括發電、輸電、配電、售電的「四合一」所有電力業務的經營形態早已落伍；台灣其實有二十幾家民營電廠，但電業法規定台電須以保證價格收購民營業者的發電，因此台電與民營電廠間不是競爭關係，而是利益共生。但這樣一來，消費端慘遭剝削已屬必然。

台電的「四合一」經營形態，嚴重背離了近年要求效率、安全、杜絕浪費的全球電力自由化趨勢；雖然經濟部知道電力自由化是國際趨勢，只有自由化的競爭環境才有成本概念，才有效率可言，才可能提供用電戶合理電價及高品質電力；但至今自由化一談十多年，卻始終不見行動。

以美國東部互聯電力系統為例，轄下幾十、上百個民營發電廠經理，必須精確計算幾個月後的發電燃料價格、人事成本、天災頻率甚至勞工怠工等所有變數，詳細核算成本後壓低報價，才能爭取到公用事業聯盟的供電訂單；哪裡像台灣，反正利潤是法定的，沒有人競爭供電生意，電價當然捨專業就政治。

大家都知道近年因為工業外移，台灣的電力已明顯供過於求，但優惠且全數收購民營電廠所發電力的不合理政策仍在持續；這些支出，台電直覺地全數轉嫁給消費者，暴露出視消費者為無物的經營心態。

台電一年要花費近千億元執行優惠價格且全數收購汽電共生、風力、再生能源的民營電廠發電，為了依法收購這些佔台灣總發電量超過五分之一的電力，台電竟然得讓自己的發電設備降低利用率，甚至閒置，造成難以估計的硬體投資浪費；另方面，大有來頭的民營電廠尖峰時用自己成本較低的電，離峰時拚命發電賣給台電賺取高額差價；既有保證價格的收購環境，不去賺豈不是笨蛋？更糟糕的是，大部分汽電共生的民營電廠不是使用天然氣等潔淨能源，而是成本低熱效率也低的燃煤、燃油機組，而且很少回收廢熱，電發得愈多，其實對台灣環境的傷害愈大。

台灣的消費者當然知道能源供應的嚴峻，也知道應該共體時艱分攤成本增加；但政府應該做包括供應端油電商的成本合理化努力，不能老把人民當提款機，硬要消費者承擔無理的支出。