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Taiwan premier halts power hike until October 2013

Publication Date : 18-09-2012

 

Taiwan Premier Sean Chen yesterday announced that the Cabinet has decided to halt the power hike originally scheduled for December 10.

According to local reports, the final decision will not be made before Oct 1, 2013.

Chen said the Cabinet made the decision to ease the pressure of price hikes on citizens, companies and industries alike. The decision was also made to soften the impact of the third round of quantitative easing (QE3) announced by the US Federal Reserve.

According to Chen, QE3 and the European Central Bank's monetary policies are both likely to fuel inflation. After the announcement of QE3, gold, minerals and oil prices all rose. Foreign exchange markets and financial markets were also affected.

Economic Minister Shih Yen-shiang stated that the changes in the global economic conditions this year have been beyond expectations.

Shih added that he and his ministry should be responsible for the power-rate about-face.

President Ma Ying-jeou said yesterday that neither the KMT nor the Taiwan Power Co. (Taipower) will collapse because of the decision.

Chen's announcement came after a series of meetings with Kuomintang (KMT) legislators, government officials and KMT members. Presidential Office Secretary-General Tseng Yung-chuan concluded in a meeting on September 16 that the consensus among KMT legislators is that the power hike should be halted, that the Cabinet should make the announcement as early as possible, and that the result of Taipower's reform has not met the expectations of the public.

To avoid the controversy usually surrounding the adjustment of power rates, Chen urged the Ministry of Economic Affairs (MOEA) to set an equation for electricity prices, instead of raising the electricity prices whenever Taipower suffers losses.

According to the premier, the average electricity price was NT$2.76 (US$.09) per kilowatt in 1982 and NT$2.6 per kilowatt in May 2012. From 1982 to last week, oil prices had risen from US$30 a barrel to US$98 a barrel, while coal prices rose from less than US$36 per tonne to US$125 per tonne.

As fuel prices fluctuate, electricity rates should change as well, just as domestic oil prices do, Chen said.

Shih stated that his ministry will establish an equation by Oct 1, 2013. The equation will include coal, oil and gas prices as variables.

According to local reports, the ministry plans to adjust the power rates every quarter, unlike oil prices, which are adjusted every week.

Taipower spokesman Lee H.C. stated that Taipower will continue to reform in order to meet the expectations of the public.

Lee said that the company has changed after Huang Chung-chiou, the new chairman, took over. Unlike before, a lot of information, including information on coal procurement, can be found on the company's official website. Lee said that although there is still a lot of information to be disclosed, the process of change has begun.

Taipower estimated that by the end of 2012, the company will suffer a NT$291.7 billion loss — 90 per cent of its total capital. According to local reports, the company will be on the brink of bankruptcy.

In response to the decision to halt power hikes, companies voiced their approval in unison.

United Microelectronics Corp.said that the Cabinet's decision will ease the pressure of rising costs.

A.mart, a retail company, also expressed its approval, adding that it has conducted internal controls, purchased energy saving facilities and changed its operation processes to reduce the impact of power hikes.

Feng Hsin Iron and Steel stated that it will be able to spend less on electricity for at least three quarters next year, which will reflect on the company's financial statement in 2013.

US$21 = 29.3 Taiwan dollar

 

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