Taiwan Power Co (Taipower), the state-owned electricity utility, is grappling with a significant rise in fuel costs, anticipating an increase of more than NT$160 billion (approximately US$4.92 billion) this year. This surge is attributed to elevated natural gas prices, driven by ongoing tensions in the Middle East involving the United States, Israel, and Iran.
Since the conflict began in late February, natural gas prices for the power sector have soared over 70%, adding approximately NT$71.1 billion to Taipower’s fuel expenses between March and August. The utility has warned that continued high fuel costs could further inflate its accumulated losses by an additional NT$70 billion this year, potentially bringing the total to around NT$420 billion.
The financial strain on Taipower is compounded by electricity rates that are set below operating costs and significant interest payments on infrastructure-related borrowing, which totals approximately NT$1.85 trillion. The company expects to pay NT$30 billion annually in interest alone. To offset these challenges, Taipower is seeking government assistance through a proposed NT$71.1 billion supplemental budget, which is currently awaiting legislative review.
Despite the financial pressures, electricity rates in Taiwan have remained unchanged since September of last year, when a modest 0.71% increase was implemented. The government has opted not to raise rates in recent evaluations to avoid exacerbating consumer price pressures. However, Taipower has proposed a 12.83% electricity rate hike to address rising fuel costs and mounting financial burdens. The government is slated to review electricity pricing again in December.
This situation underscores the broader impact of Middle East tensions on global energy markets and highlights the difficulties Taiwan faces in maintaining stable electricity prices while managing escalating energy import costs.