COSY CABAL:：Taipower has been buying unneeded electricity from its subsidiaries — staffed by its retired senior officials — at inflated rates, wasting billions of dollars
By Chris Wang / Staff reporter
Tue, Apr 17, 2012 - Page 1
Taiwan Power Corp (Taipower, 台電) has wasted tens of billions of dollars on unnecessary reserve capacity and failed to avoid conflicts of interests with its subsidiary companies, the Democratic Progressive Party (DPP) alleged yesterday.
“If the reserve capacity rate had been reduced to 16 percent — a target adopted by the previous DPP administration — or lower, Taipower would be profitable, so that it wouldn’t have to raise electricity prices,” former premier Frank Hsieh (謝長廷), the DPP presidential candidate in 2008, told a press conference.
President Ma Ying-jeou (馬英九) and the Chinese Nationalist Party (KMT) have said electricity prices must go up because of Hsieh’s decision to freeze prices during his tenure as premier from February 2005 to January 2006.
Hsieh denies this was the case, saying he demanded Taipower lower its reserve capacity rate from 20 percent to 16 percent after consultations with experts, who said a 10 percent reserve capacity rate would be sufficient.
“As a result of that decision, we were able to cut annual costs by NT$40 billion [US$1.35 billion] and keep electricity prices unchanged without jeopardizing electricity security,” Hsieh said.
However, he said the reserve capacity rate during Ma’s four years in office had averaged 23 percent, including an all-time high of 28.1 percent in 2009. Taipower kept purchasing electricity from independent power producers (IPPs) — most of which are its subsidiary companies — every year, despite its own production exceeding national demand in six of the 13 years between 1999 and last year, Hsieh said.
“I have no doubt a scandal lies under the carpet,” he said.
The leaders of at least four IPPs, all subsidiaries of Taiwan Cogeneration Corp (Taiwan Cogen, 台灣汽電共生股份有限公司), Taipower’s reinvestment company, are retired senior officials from Taipower or CPC Corp, Taiwan (CPC, 台灣中油), he said.
The leaders established private IPPs after retiring from state-run Taipower and sold electricity back to Taipower at higher rates, which guaranteed the IPPs considerable profits, he said.
“They were like squirrels in the fall, hiding their food somewhere so they knew they would have something to eat in the winter,” Hsieh said.
DPP Legislator Pan Men-an (潘孟安) said the DPP caucus would demand that Taipower immediately disclose its agreements with the IPPs and freeze prices.
The party would also ask the government to explain who made the decision to raise the reserve capacity rate and authorize the judiciary to launch an inquiry into the process, Pan said.
Ma said in the second half of the 2008 that electricity prices had to increase because of Taipower’s losses, DPP Legislator Chen Ting-fei (陳亭妃) said.
“And he did approve the price increase that year. Ironically, the reserve capacity rate reached an all-time high of 28.1 percent in 2009,” she said.
“We would save NT$10 billion for every percentage point reduction in the reserve capacity ratio, which means that Taipower overbudgeted NT$240 billion on reserve capacity purchases between 2009 and last year,” she said.
DPP Legislator Yeh Yi-jin (葉宜津) described the extra and unnecessary reserve capacity as an “invisible burden on the public.”
“Taiwanese should not be asked to compensate mismanaged Taipower with money from their own pockets,” Yeh said.
Meanwhile, Minister of Economic Affairs Shih Yen-shiang (施顏祥) said the government would consider shouldering the cost of subsidized electricity prices for offshore counties to help Taipower reduce its deficit.
Taipower has been absorbing annual losses of between NT$4 billion and NT$5 billion for the outlying islands, Shih told the legislature’s Economics Committee as it was discussing the impending electricity rate hike.
It costs NT$14 on average to generate a kilowatt hour of electricity on Matsu compared with about NT$2 for Taiwan proper, the minister said. In Penghu, the cost is NT$8 and on Kinmen it is NT$10, he said.
“The [company’s] losses in those areas are not small,” Shih said. “The deficit should be subsidized by the government, and we can discuss how to source the funds for it.”
Additional reporting by CNA