Taiwan Power Co (Taipower), the state-owned electricity utility in Taiwan, is bracing for a significant increase in fuel costs, projecting an additional NT$160 billion (approximately US$4.92 billion) this year. This rise is attributed to elevated natural gas prices amid ongoing tensions in the Middle East involving the United States, Israel, and Iran.
Since the onset of the conflict in late February, natural gas prices for the power sector have surged by over 70 percent. The increase between March and August alone added approximately NT$71.1 billion to Taipower’s fuel expenses. This surge in costs is likely to exacerbate Taipower’s financial challenges, potentially increasing its accumulated losses by another NT$70 billion this year, which would bring the total losses to around NT$420 billion.
The company’s financial difficulties are compounded by the high cost of fuel imports, electricity rates that remain below operating costs, and significant interest payments due to extensive borrowing for infrastructure projects. Taipower’s outstanding borrowing for such projects stands at approximately NT$1.85 trillion, with annual interest expenses expected to reach NT$30 billion.
In response to these pressures, Taipower is seeking government assistance through a proposed NT$71.1 billion supplemental budget intended to cover its growing financial losses. This proposal is currently under legislative review. Despite these challenges, electricity rates in Taiwan have remained unchanged since September of the previous year, when the average tariff was increased by a mere 0.71 percent. The government has refrained from raising rates in recent reviews to prevent adding pressure to consumer prices.
Nonetheless, Taipower has proposed a 12.83 percent increase in electricity rates, citing the mounting financial pressures from rising fuel expenses. The government is set to review electricity pricing again in December. The situation underscores the impact of Middle East tensions on global energy markets and highlights the challenges Taiwan faces in maintaining stable electricity prices while managing rising energy import costs.