Taiwan Power Co (Taipower), the state-owned electricity utility, is bracing for a significant rise in fuel costs, anticipating an increase of over NT$160 billion (approximately US$4.92 billion) this year. This projection comes amid heightened natural gas prices due to ongoing tensions in the Middle East, which have surged by more than 70 percent since a conflict involving the United States, Israel, and Iran began in late February.
Between March and August, Taipower’s fuel expenses soared by approximately NT$71.1 billion, largely attributed to the increased natural gas prices impacting the power sector. The utility has expressed concerns that these escalating costs could further inflate its accumulated losses by an additional NT$70 billion this year, pushing the total losses to around NT$420 billion. Factors contributing to Taipower’s financial struggles include high fuel import costs, electricity rates that do not cover operating expenses, and interest payments on substantial infrastructure-related borrowing.
With outstanding infrastructure-related borrowing standing at approximately NT$1.85 trillion, Taipower’s annual interest expenses are expected to reach NT$30 billion. In response to its financial predicament, the company has sought government assistance through a proposed NT$71.1 billion supplemental budget aimed at offsetting its mounting losses. This proposal is currently under legislative review.
Despite the financial pressures, electricity rates in Taiwan have remained unchanged since September of the previous year, when the average tariff was increased by 0.71 percent. The government has been reluctant to hike rates in recent reviews, citing concerns over adding pressure to consumer prices. However, Taipower has proposed a 12.83 percent increase in electricity rates, pointing to the rising fuel costs and financial challenges as justification. The government is set to review electricity pricing again in December.
The situation underscores the broader impact of Middle East tensions on global energy markets and highlights the challenges faced by Taiwan in maintaining stable electricity prices while grappling with rising energy import costs.