Taipei, June 27 (CNA) The Control Yuan, Taiwan's top government watchdog, on Wednesday called on the state-run power company and two government agencies to correct an electricity purchasing policy that it said has wasted taxpayers' money.
Taiwan Power Co. (Taipower), which is under the supervision of the Economics Ministry, had bought highly priced electricity from private power firms and sell low-priced state-generated electricity to the firms, according to the report.
This practice contributed to losses of NT$117.8 billion (US$3.94 billion), as of the end of 2011, for Taipower, it said.
Since 1988, Taiwan has encouraged qualified companies to establish cogeneration systems -- the generation of both electricity and heat -- at their facilities, as part of the government's attempts to boost generation capacities to maintain the nation's power reserve levels.
Under the policy, the government guarantees the purchase of electricity generated by the privately-run cogeneration firms and the supply of state-generated electricity for the running of their facilities.
Taiwan's domestic power reserve margin -- the minimum capacity needed to cushion against extreme weather or unplanned outages -- stood between 20.6 and 28.1 percent over the past three years, which is higher than the target rate of 16 percent, an indication that power generation is more than sufficient, according to the report.
However, Taipower continued to buy electricity from cogeneration firms, resulting in significant losses, the report said.
In addition, the market lending rate has dropped since 2003, cutting the borrowing costs for the firms.
However, Taipower and the Economics Ministry failed to negotiate less costly terms with the private power firms and even agreed to buy their electricity at a higher rate as requested by the firms, leading to an additional cost of NT$5.9 billion in 2007-2011, the report said.
The report also pointed the finger at the Economics Ministry for approving the establishment of Hsing-yuan Power Corp. in 2005, despite the Cabinet's prior announcement to lower power reserve levels to 16 percent from 20 percent.
The Energy Bureau's policy of allowing Taipower to buying electricity during peak hours at higher prices also drovethese private power firms to generate more power at such hours,causing greater costs for Taipower, the report said.
Control Yuan officials have also asked the Economics Ministry to look into the matter of retired Taipower executives being employed as chairmen or presidents at private power firms for possible conflicts of interest.
(By Justin Su and Ann Chen)