Taipower Losses Scrape Bottom
United Daily News editorial (Taipei, Taiwan, Republic of China)
August 29, 2013
Summary: Taiwan electricity rates are too low. People realize this. They would be willing to pay a reasonable price to achieve industrial growth and environmental balance. Unfortunately the government and Taipower electricity rates are black box operations. This ensures that electricity rate hikes remain opaque, and low value-added industries cannot be replaced. Taipower has gone from "honorable loser" to a "necessary evil." Will these endless losses ever hit bottom?
Full text below:
The Ministry of Economic Affairs has announced an October electricty rate hike. The magnitude of the hike is less than announced previously. For families and small shops the threshold will not be raised. But over ten million users will feel the price increases. The new program defers to consumer sentiment. It raises the excessively low rates for industrial electricity, making them more reasonable. Overall Taipower rates remain among Asia's lowest, but alas are no help to business competitiveness. Taipower remains on the brink of collapse -- a money pit.
Taipower finds itself trapped and immobilized. The Number Four Nuclear Power Plant remains a hot potato. The liberalization of the energy industry and the promotion of green energy have fiascoes, like the proverbial blind men struggling to discern the shape of an elephant. Taiwan's political and business environment is deformed. Well-intentioned policies invariably attract unscrupulous politicians. State-owned enterprises have long transformed benefits into exclusive slush funds. As a result Taipower losses have skyrocketed. Realistic constraints are vital. The cure must fit the disease. Rate hikes are better than nothing, but that is about all they are.
Should electricity rates be hiked? The public already knows the answer. The principle is "user pays." What should be paid, will be paid. If international fuel prices increase, users will have to pay no matter how much it hurts. The problem lies with the Ministry of Economic Affairs, which determines rate hikes. Taipower must tell the public whether our electricity is expensive or cheap, and how that is determined. Has Taipower done its utmost to run an efficient and responsible business?
Anti-nuclear sentiment is on the rise. One issue urgently in need of discussion, is the impact of different fuels on electricity prices. Politicians have played fast and loose with this issue, and misled the public. They talk only of safety. They ignore the reality of rising international fuel prices. They single out nuclear power as dangerous. They ignore the fact that natural gas prices are several times higher. They ignore the impact dependence on natural gas would have on electricity rates. When the opposition was in power, it rushed to complete the Number Four Nuclear Power Plant. It now conveniently blanks out this fact. It now blames Number Four Nuclear Power Plant problems on the incompetence of the ruling party. It now politicizes the issue and incites public discontent over rate hikes.
Energy prices have long failed to reflect true market rates. State-owned enterprises have long been indifferent to losses because they are passed on to others. These are the reasons Taipower losses have become a black hole that can never be filled. Those in charge will retire at age 65. Losses are listed in the ledger, then passed on to others. They are not factored into the individual official's job performance. Under such conditions, how can anyone know how well they performed? How can anyone know how much was lost?
The current rate hikes mean that in one year Taipower will receive 50 billion NT in revenue. But even this cannot save Taipower from bankruptcy. On Father's Day this year the temperature reached a high of 39.3 degrees Centigrade. Taipower's reserve capacity is inadequate, and could lead to power outages at any moment. The public must understand this crisis. Residential electricity users may be dissatisfied with the rate hikes. But they must also appreciate the plight of lower echelon Taipower staff on the firing line, how hard they work making emergency repairs. They must be reminded of the fact that the electricity on that day was produced by high-priced gas-fired electrical power generation. Green Energy contribution to the power supply in the form of wind power was less than one percent. This is the reality. The public must not listen only to the bleatings of anti-nuclear Green Energy charlatans.
The deterioration of the power grid is Taipower's most intractable problem. Given Taiwan's power supply environment, nuclear power, coal, fire and other forms of "coolie labor" base load generating capacity must reach 65%. Only then can it achieve stability and economy. But current base load generating capacity is barely 40%. Summer peak load generating capacity requires the use of expensive gas turbines and fossil fuel. Therefore a closer look this electrical pricing scheme shows that Taipower's operational loss situation remains unchanged.
Times have changed. Policies must also change. For example, industrial electricity rate concessions for high value-added industry do not work. Industries long dependent on low rates lack the motivation to conserve. A capital cost of over 3 NT, brings a return of less than 1 NT in off-peak electricity prices. The result is that cast iron foundries, fabric dyeing, and other low value-added industries refuse to shut down or restructure. How can this be justifed?
The current price hikes are too conservative. As a result, the government forces taxpayers to subsidize Taipower's losses. On top of which the deficit is increased. Government subsidies unjustly force the public as a whole to subsidize major energy users. The government prices energy far below international standards. This reduces business awareness of the need to enhance their competitiveness.
Taiwan electricity rates are too low. People realize this. They would be willing to pay a reasonable price to achieve industrial growth and environmental balance. Unfortunately the government and Taipower electricity rates are black box operations. This ensures that electricity rate hikes remain opaque, and low value-added industries cannot be replaced. Taipower has gone from "honorable loser" to a "necessary evil." Will these endless losses ever hit bottom?
2013.08.29 05:05 am