The Ministry of Economic Affairs (MOEA) has released a revised second-phase electricity price adjustment plan which will take effect this October 1, Premier Jiang Yi-huah stated at the Cabinet meeting today.
The revised plan was made after taking into consideration the views of various sectors of society and deliberating factors such as the sustainability of Taiwan Power Co. (Taipower) as well as the impact of an electricity price hike on both the current economic situation and the cost of daily commodities, said Jiang.
"This rate adjustment is necessary for the sustainable operation of the electricity industry," the premier declared. "I hope all industries will bear with the government during this difficult time and help keep commodity prices stable." He directed the MOEA to continue explaining the new rate plan to the public.
The first-phase electricity price adjustment took place June 2012 to encourage the public and industries to conserve electricity and adopt greener lifestyles and operations. The second-phase plan was originally scheduled to take effect December 2012 but was postponed until October 1, 2013 for amendment after the public expressed discontent with the original plan.
Before these adjustments, Taipower had been accumulating huge aggregate losses because international fuel prices have been soaring ever since 2003 and the company had not raised its prices to recoup its higher costs, Jiang said.
"As Taiwan lacks energy resources of its own, this state of affairs not only encouraged inefficient consumption and inflated the amount of consumption subsidies provided but also lowered the nation's long-term industrial competitiveness and inhibited the development of renewable energy. This aligned with neither social fairness nor the user-pay principle."
Under the MOEA's revised formula, households with electricity consumption below 500 watts per month—an estimated 9.85 million households, or 86 percent of the nation's total—will not see any increase in their electricity rates. Meanwhile, a new, stricter pricing category for users of 1,001 watts per month and above has been added. "This meets the principle of fairness: whoever consumes more electricity will receive less in subsidies," explained Jiang.
With respect to commercial electricity consumption, the revised formula exempts businesses that consume less than 1,500 watts per month from any price increase, and so an estimated 710,000 businesses (about 80 percent of total businesses) will not be affected. This is a significant change from Taipower's original plan, under which only businesses using less than 330 watts monthly, tantamount to only 290,000 businesses, would have been exempted. Meanwhile, the scheduled price increase for mid- to large-size businesses and industrial consumers will be 10 percent less than originally planned.
"The impact on all consumers—from residences and small businesses to large commercial and industrial firms—has been minimized," stated the premier.
According to estimates by the Directorate-General of Budget, Accounting and Statistics and Chung-Hua Institution for Economic Research, the adjustment in electricity rates will affect this year's gross domestic product less than 0.02 percent and the consumer price index less than 0.06 percent.
In light of possible fluctuations resulting from anticipation or speculation by citizens, Jiang directed Vice Premier Mao Chi-kuo, who chairs the Executive Yuan's price stabilization task force, to closely monitor for abnormal price surges.
"Should any businesses raise product or service prices on the grounds of the electricity price hike, the government will take commensurate measures to deal with them," said the premier. "Throughout last year, the price stabilization task force examined and overhauled relevant measures implemented over the past 10-plus years, and I expect this mechanism to effectively stabilize commodity prices."
With regard to the effect of the electricity hike on schools, the premier asked the MOEA to provide detailed information to the Ministry of Education. "Elementary and junior high schools already have the lowest power rates, so they will not to be affected at all," he confirmed. "For high schools, colleges and universities, the government will provide a 5-percent discount on their rate hikes. I hope these institutions will promote energy conservation on campus to overcome this issue."