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Taipower to narrow losses by trimming costs

2012/05/04 18:14:15

Taipei, May 4 (CNA) Taiwan Power Co. (Taipower) will be expected to review and carry out new procurement policies to narrow mounting losses, an official said after the second meeting Friday of a task force created to review the performance of Taiwan's state-run oil and power companies.

Taipower will reduce its coal procurement costs and revise contracts with local independent power producers, Liu Ming-chung, executive director of the ministry's State-owned Enterprise Commission, told reporters after the closed-door meeting.

According to Liu, Taipower currently spends roughly NT$90 billion (US$3.08 billion) on coal and NT$140 billion to buy electricity from outside sources, such as independent power producers, a year, but Liu did not provide an estimate of the potential savings of the new plan once it takes effect.

The company also hopes to save NT$2.7 billion by lowering administrative costs and renting land that has sat idle, he said.

Taipower has come under attack since the government announced in early April that electricity rates would be raised substantially in May to help the state-run utility cover mounting losses.

The announcement sparked outrage, with critics contending that some of the company's losses were due to poor management and bloated pay scales and that consumers and the private sector should not have to pay for Taipower's waste and inefficiency.

The second meeting of the task force, however, did not cover issues related to the company's manpower, compensation and benefits system, or electricity rates.

Due to time constraints, state-run oil company CPC Corp., Taiwan was not discussed either, he added.

Following the backlash over the original plan to raise power rates, the government decided to phase in the higher rates, beginning in June, in three stages instead of implementing them in a single go.

But some lawmakers have asked that any hikes be pushed back until after the conclusion of peak summer electricity consumption season, when rates are normally higher than during the rest of the year.

Economics Minister Shih Yen-shiang said before the meeting, however, that the government is still planning to put through both the peak season price hike and the phased-in price hike in June.

"It is a matter of principle and it should not be changed," Shih said.

Under the government's three-stage plan, the first- and second-stage price hikes will take effect on June 10 and Dec. 10, respectively, while the date for the third stage will only be determined after the government reviews how well the state-run power company has carried out reforms.

According to the plan, the electricity rates for the first two stages will rise a combined 9 percent, 21 percent and 27 percent, on average for household, commercial and industrial users, respectively, according to the ministry.

Taipower is expected to lose NT$72.2 billion this year, which would push accumulated losses to NT$190.1 billion by the end of 2012, according to the ministry.

(By James Lee)