Wednesday, May 02, 2012

Ma Administration Comes Around on Electricity Rate Hikes

At night, the snails come out by the thousand.

The Ma Administration, under fire for the sensible move of raising electricity prices but doing it all in one fell swoop, finally bowed to sanity yesterday and announced that the hikes would be phased in in three stages (Taipei Times):
Prices will rise by 40 percent of the originally planned adjustment on June 10, and another 40 percent on Dec. 10. The date for the remaining 20 percent will depend on whether the public is satisfied with state-run Taiwan Power Co’s (Taipower, 台電) reform efforts, Ma said at an impromptu press conference at the Presidential Office last night following a three-hour meeting with senior officials on the issue.
"The date for the remaining 20 percent will depend on whether the public is satisfied with state-run Taiwan Power Co’s (Taipower, 台電) reform efforts". What does this mean? Remember when ECFA wouldn't be inked without 60% of the public approving?

The Taipei Times also reported that the rate hikes will not affect households and small businesses with electricity usage less than 330 kilowatt-hours. It noted:
According to the ministry, due to rising international fuel prices, Taipower has incurred losses of NT$117.9 billion between 2008 and the end of last year. The last time the government raised electricity rates was at the end of 2008.
Electricity prices have not risen in four years. Recall that the Chen Administration permitted prices to rise until August of 2007 when it suspended the floating price mechanism ahead of the elections. The Ma Administration never raised them, instead sinking the CPC into debt. The CPC's 2011 financial report shows the debt situation. The ratio of current assets to liabilities has plummeted since the Ma Administration took power:
2006 = 1.43
2007 = 1.53
2008 = 0.86
2009 = 1.08
2010 = 1.13  
Of course, the Administration has been gobsmacked by the global downturn and rising oil prices. But the failure to raise rates for nearly four years is an abdication of public responsibility, especially since growth was excellent one year.

Remember, subsidized electricity rates are a staple of KMT industrial policy that goes back 50 years. US experts tried to get them adjusted early on in the switch from import-substitution to an export-oriented economy in the early 1960s, but without much success. The result is an economy that is biased toward polluting, inefficient industries that rely on cheap electricity and cheap water, such as the manufacturing of plastics. One reason I think the Ma Administration let the big new plastics plant in Changhua quietly die is because it gazed into its policy crystal ball, saw that sooner or later electricity prices would have to go up and that the plant must inevitably become uneconomical. The environmental movement made a nice whipping boy for that decision....

The China Post had a somewhat longer report, printing Ma's apology for the "agony" caused by the price rises. It also scribed:
The Directorate-General of Budget, Accounting and Statistics estimated that inflation this year will be 1.94 percent, Ma said. “I believe the decision of gradual increases to the electricity rates will help us to contain inflation at under 2 percent more easily,” the president said.
The DGBAS also dropped the economic growth forecast to 3.38% for the year.
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