The MOEA electricity pricing review meeting has resolved to implement an approximate 11% adjustment to the average electricity tariff

The Ministry of Economic Affairs (MOEA) convened its inaugural review meeting for the year on the 22nd to assess the electricity pricing structure for the first half of the year (covering the period from April to September). Consequently, the review committee has resolved to implement an approximate 11% increase in the average electricity tariff. This adjustment will be implemented with a detailed approach, taking into account factors such as operational conditions, livelihood electricity consumption of residential users, and varying adjustment methodologies for industrial electricity based on operational requirements.

MOEA has elucidated that despite recent fluctuations, international fuel prices continue to exhibit significant variability and remain elevated in comparison to pre-Russo-Ukrainian conflict levels. However, the initial absorption of fuel price hikes by Taipower Company (Taipower) has resulted in respective losses of 1.2 yuan and 0.9 yuan per kilowatt-hour of electricity sold in 111 and 112. The cumulative loss incurred in the year 112 has reached 382.6 billion yuan, indicating a notably dire financial predicament.

Taipower further clarified that over the past two years, expenditures on green energy procurement represented 6% and 9% of total costs, respectively, each falling below the 10% threshold. Additionally, considering that nuclear power comprised 16% of the energy mix in 2015, if integrated into current pricing models, the resultant power generation costs would remain proximate to the current levels, at nearly 4 yuan per kilowatt-hour. This observation underscores that the predominant cause of Taipower's financial challenges lies in the significant escalation of international fuel prices subsequent to recent geopolitical conflicts, rather than the purported impact of energy policies or green energy procurement, as posited by external sources.

MOEA announced that following comprehensive deliberation during this review, it has endorsed the proposal put forth by committee members to refine Taipower's proposal. This refinement aligns with the guiding principle of "reflecting costs, safeguarding livelihoods, stabilizing prices, promoting energy efficiency, reducing carbon emissions, and ensuring fair distribution of expenses among users". Under the condition of government subsidies amounting to 100 billion yuan, the resolution entails an approximate 11% increase in the average electricity tariff, resulting in an adjusted overall average electricity price of 3.4518 yuan/kWh, effective April 1st. Furthermore, various user adjustment schemes have been meticulously considered, with a focus on maintaining equity and adhering to the aforementioned principles. Notably, adjustments for residential users have been moderated to minimize impact on livelihoods, although adjustments are scaled according to consumption levels. However, the higher the scale spacing, the higher the amplitude adjustment; The industrial electricity consumers will undergo relatively higher amplitude adjustments, contingent upon operational circumstances and consumption profiles.

Regarding the residential electricity rates, particularly for basic consumption levels (below 330 kWh), have experienced minimal three-times adjustments since 1993, resulting in current unit prices that are lower than those of two decades ago. For instance, electricity consumption below 120 kWh was priced at 2.10 yuan per kilowatt-hour in 2004, whereas the current rate stands at only 1.63 yuan per kilowatt-hour, representing a decline of approximately 4 to 5 percent relative to costs. This significant deviation from actual costs, coupled with limited incentives for energy conservation, has led users to resort to sub-metering practices to avoid higher electricity prices.

In order to better align pricing with costs and incentivize energy efficiency, adjustments to residential electricity tariffs are proposed based on consumption tiers. Prices for residential units consuming below 330 kWh and small businesses consuming below 700 kWh will increase by 3%. For consumption levels between 331 and 700 kWh for residential units and small businesses, the increase will be 5%. Meanwhile, rates for consumption between 701 and 1,000 kWh for residences and small businesses will rise by 7%, and for consumption levels exceeding 1,000 kWh for residences and 3,000 kWh for small businesses, the increase will be 10%.

It's important to note that while the adjustment for higher consumption tiers is set at 10%, this will only apply to the excess usage beyond the threshold, ensuring that conservation efforts are not penalized by tariff adjustments based solely on consumption levels.

According to the assessment conducted by MOEA, the proposed electricity price adjustments are expected to have a modest impact on low-consumption residential users and small businesses. Approximately 93% of households, totaling 12.5 million, who utilize less than 700 kWh per month, are projected to experience an increase of less than 20 yuan monthly following the 3-5% tariff hike. This marginal increase equates to approximately the cost of two supermarket tea eggs.

Similarly, for small businesses consuming less than 1,500 kWh per month, constituting 84% or 760,000 establishments, the anticipated rise in electricity bills is less than 5 yuan per day post-adjustment. As an illustration, this increase would be comparable to the price of a braised egg in a beef noodle shop.

For businesses in the snack or coffee catering industry, with monthly electricity consumption ranging from 3,000 to 5,000 kWh, the estimated daily increase in electricity expenses after adjustment would be approximately 35 to 70 yuan. Nonetheless, it's noteworthy that the overall impact of the electricity price adjustment on consumer prices remains limited. Moreover, the evaluation of time-of-use electricity pricing for high-consumption consumers presents an additional opportunity to mitigate the burden of electricity bills.

Regarding industrial electricity consumption, adjustments are tailored to accommodate the diverse operational dynamics across various sectors. In the latter half of 2023, industries experiencing positive growth witnessed a 14% increase in electricity consumption. Those with stagnant or slightly declining performance, less than 10%, saw a 12% rise in consumption. Meanwhile, industries facing significant downturns of more than 10% registered a 7% increase in electricity consumption. This stratification aims to mitigate the impact on declining sectors and support vulnerable industries.

For large industrial electricity users and high-power consumers such as network data centers (Internet Data Centers, IDCs), a more substantial amplitude adjustment is applied to reflect electricity costs accurately. Companies with electricity consumption exceeding 500 million kWh and demonstrating an average positive growth over two years, alongside network data centers consuming over 50 million kWh, will face increases ranging from 15% to 25%, commensurate with their consumption scale. This measure is intended to effectively incentivize electricity conservation efforts.

Certain sectors, including agriculture, fisheries, educational institutions (from kindergartens to universities), and social welfare organizations, will maintain current electricity prices. Industries subject to halved adjustments and frozen prices will undergo further evaluation by the review committee in the latter half of the year.

MOEA further elaborated on three resolutions associated with electricity pricing: Firstly, the adjustment of electricity rates is contingent upon the level of government subsidies. In the event of necessity, an extraordinary meeting may be convened prior to the second electricity price review meeting of the current year to assess Taipower's financial status; Secondly, Taipower is directed to reassess the validity of provisions regarding user account separation, ensuring their alignment with regulatory standards; Thirdly, electricity tariffs for agricultural and fishery sectors, educational institutions, and social welfare organizations will remain unchanged. Competent authorities will be tasked with preparing budgets for expenditures from the following year in accordance with these provisions.