Taiwan bows to public anger on power bills

Govt reduces impact of tariff hike by spreading it over several months

The Straits Times, 3 May 2012 

TAIPEI: Taiwan's government has scaled back a plan to increase power tariffs in the face of strong public opposition, and will introduce them in small doses over the next several months to reduce the impact on broader prices.

The electricity price rise would be delayed until next month and split up, with a second rise in December and a third at an unspecified date, President Ma Ying-jeou said, announcing the revised plan late on Tuesday.

The government's original plan had called for a single, average 16.9 per cent rise for households and 35 per cent for industry from this month.

Now the planned rises are divided into 40 per cent portions for each of the first two stages, with 20 per cent left for the last. The plan will see electricity rates rise by an average of 6.7 per cent for households and 14 per cent for industry next month.

According to Mr Ma, 7.56 million families and 300,000 businesses will not be affected under the new plan, reported the China Post yesterday.

The President also explained that the rises are necessary as some 99.4 per cent of all energy in Taiwan relies on imported fuel and the government must heed the user-pay principle since it could not freeze power prices and subsidise energy consumption.

Rising global energy costs are pushing Taiwan's state monopoly utility Taipower deeper into the red, making it impossible for the company to absorb price rises.

The hikes come on the heels of a petrol price rise last month, which was driven by the need to stem another haemorrhage - the further losses at state fuel supplier CPC Corp.

Taipower faces losses this year of some NT$100 billion (S$4.3 billion) while CPC, which has a 75 per cent share of Taiwan's domestic petrol market, predicts a loss of some NT$34 billion. Taiwan's government controls most utility and fuel prices as well as those of some staple foods.

'This is a tough decision, but the decision is not avoidable,' Mr Ma said of the electricity price hikes. 'I am sorry to cause the agony stemming from the price hikes,' he added, promising that the government will monitor prices to prevent further surges.

But the hikes, plus the earlier rise of around 10 per cent in petrol prices, have threatened to push up inflation in Taiwan, a sensitive subject for the stability-minded central bank, the Reuters new agency pointed out on Tuesday.

Mr Ma, however, said the revised plan can mitigate inflation, keeping it within 2 per cent.

The government raised its inflation forecast for 2012 on Monday to 1.94 per cent from a previous 1.46 per cent. According to a Reuters poll, private economists expected inflation to be around 1.5 per cent this year.

The two energy price hikes have provoked an angry backlash from consumers and businesses, who accused the government of making them pay for inefficiency and cosy working conditions at the state firms. Although Mr Ma said the third stage of the price rise will go into effect only when Taipower presents a 'satisfactory and acceptable' reform programme, many quarters remain unappeased.

Commenting on the President's statement, the major opposition Democratic Progressive Party (DPP) said the electricity rates should not go up at all and stressed that it was within Taipower's ability to turn around its situation, such as by reviewing its purchase contracts and reducing its waste.

According to the DPP, Taipower has been charging independent power producers low electricity rates and buying electricity back from them at rates above the market average.