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China Times: About-face on rate hikes reveals blind spots

2012/05/07 18:27:44

Taiwan Power Co. (Taipower) Chairman Edward Chen's offer to resign over the weekend was quickly accepted and Economics Vice Minister Hwang Jung-chiou has been named as his replacement.

Chen's surprise resignation came on the heels of President Ma Ying-jeou's announcement that electricity prices will be raised in three stages from mid-June instead of in a single hike as previously stated.

The policy reversal and abrupt personnel reshuffle were apparently prompted by political considerations to quell public grievances. However, if the Ma administration does not change its way of thinking or policymaking model, and if state-owned enterprises fail to speed up reforms, similar scenarios or plights will occur again.

President Ma will be sworn in for his second term May 20, but his approval rating is fast declining as shown in various recent opinion polls.

Moreover, drives for street protests on his inauguration day are gathering larger-than-expected momentum.

While raising prices is a normal market function to reflect rising international crude oil and other material costs, President Ma and his administrative team should prudently deliberate why the recent fuel and electricity price adjustment plans have drawn such an unusually strong backlash and why the issue has become so complicated.

From past to present, utility price increases have always sparked public outcry. Against this backdrop, the government should be well-prepared before coming up with price hike schemes. Much to our disappointment, neither of the latest price hike plans presented by Taipower and state-run oil refinery CPC Corp. was well thought out.

CPC cut fuel prices shortly afterwards to ease protests, while Taipower's adjustment plan has to be modified before its enforcement under enormous pressure.

Chen's resignation could be the first domino to fall in the overhauling of the country's sole electricity supplier and other state-owned enterprises.

Given Taiwan's lack of natural resources, it's right to end government subsidies for fuel and electricity prices and let market mechanism determine their prices.

However, before raising prices, state-run enterprises should improve their management, enhance operational efficiency and minimize budget waste.

Regrettably, Taipower executives and some senior administration officials repeatedly citied the company's huge losses as a reason to justify its electricity price hike plan.

Taipower should have instead reminded the public of the need to save electricity amid mounting energy costs and ever more stringent international carbon reduction requirements.

Our policymakers should also be more mindful of public sentiments before presenting any reform initiatives or adjustment plans for utility prices. (Editorial abstract -- May 7, 2012).

(By Sofia Wu)