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The impact of the oil price collapse requires continued observation Electricity Tariff Examination Council decides not to adjust electricity tariff
Date: 2020-06-01
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Ministry of Economic Affairs (MOEA) held the first 2020 Electricity Tariff Examination Council meeting on 18th March, reviewing and confirming the various costs and reasonable profits of public utility enterprise in accordance with the "Calculation Formula for Electricity Price of Electricity Retailing Utility Enterprise. " Due to COVID-19 and the failed negotiation of production cuts, oil price has recently experienced drastic fluctuations. If oil price continues to fall, the annual profit of Taipower will exceed its reasonable profit margin, and the surplus will be allocated to the electricity price stabilization fund. Considering the priority is to stabilize the electricity tariff, the Council decided not to adjust the electricity tariff, keeping it at NT$2.6253/kWh.

According to the "Calculation Formula for Electricity Price of Electricity Retailing Utility Enterprise," electricity tariff is examined twice a year, usually in April and October. And the maximum price adjustment is set at 3%. The MOEA states that fuel costs are the main factor affecting electricity price. Though the international oil price has recently seen drastic fluctuations, the coal price has not been affected; only the price of natural gas is currently affecting Taipower' s fuel costs, accounting to nearly 1/3 of the total costs. The natural gas price is calculated based on both long-term contract price and spot price, and thus does not fully reflect the spot price.

The MOEA explained that the current drop in oil price is the result of competition and cooperation of the oil-producing countries. Although short-term economic conflict caused the sheer drop in oil price, oil-producing countries may also increase the price jointly in the future. Due to the rigidity of commodity prices, increase of electricity tariff will lead to increase in commodity prices, but reduction of electricity tariff might not bring down commodity prices. To avoid fluctuations in commodity prices and impact on daily life, the electricity tariff is not adjusted this time. MOEA will continue to observe the outcomes and influences of oil production cut negotiated by oil-producing countries, and the actual fuel costs will be reviewed in the next (September) Examination Council.

Furthermore, the Examination Council prioritizes the importance of the level of electricity price stabilization fund to the stability of commodity prices. Within reasonable range of official return rate based on the electricity price formula, NT$32.7 billion taken from the fund is verified as the supplement to Taipower in 2019. Therefore, the account balance of electricity price stabilization fund is NT$10.8 billion after supplement.

Based on the full-disclosure principle, MOEA will disclose the detailed information, including meeting minutes, meeting discussion materials, and the electricity costs information, on the website within 10 days after March 18th. Starting from March 28th, the public can access the "Electricity Tariff Rates Information Disclosure Section" (https://www3.moeaboe.gov.tw/ele102/) via the homepage of MOEA or the Bureau of Energy to obtain related information of Electricity Tariff Examination Council and costs of Taipower.

Spokesperson for Bureau of Energy, Ministry of Economic Affairs: Deputy Director General, Chun-Li Lee
Phone Number: 02-2775-7700  
Mobile: 0936-250-838
Email: chunlee@moea.gov.tw

Business Contact: Director, Chih-Wei Wu
Phone Number: 02-2775-7750
Mobile: 0922-339-410
Email: cwwu@moea.gov.tw

Media Contact: Section Chief, Yu-Hsuah Hsia
Phone Number: 02-2775-7705
Mobile: 0910-668-295
Email: yhhsia@moea.gov.tw
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