Strengthening Supplier Management-Corporate Governance-Taipower Sustainability Section - Taiwan Power Company

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Supplier Composition


Taipower's suppliers include the providers of fuel, materials, and equipment necessary for power generation and as well as suppliers of external electric power. The Company monitors the potential risks of suppliers with different characteristics and manages their quality, output, and impact on the environment and society.


Fuel Supplier Management


The main fuels used in Taipower's thermal power plants are coal, natural gas, and fuel oil. Nuclear power plants also require nuclear fuel. Taipower adheres to the four strategies of energy supply diversification, long-term supply contracts, safe inventories, and stable coal transportation to ensure stable fuel supplies. The Company provides power plants with fuel promptly and at suitable quality and quantity to ensure the safety and stability of the power supply. Detailed measures and actions are described below:

Suppliers of Materials and Equipment

Suppliers of Materials

Taipower provides professional internal training and consultation for issues associated with the Government Procurement Act. Training ranges from front-end material numbering, supplier capability reviews, and establishment of qualified supplier lists and management to requisition and demand management, procurement, acceptance, and logistics operations. Taipower is also actively implementing supply chain digital transformation and has established Enterprise Resource Planning (ERP), a Supply Chain Management (SCM) platform, and a Warehouse Management System (WMS) to achieve internal and external network collaboration and construct a comprehensive system.

The Equipment Supply Chain

Taipower integrated the evaluation/re-evaluation/inspection/feedback steps on defects with ISO 9001 to execute supplier management and auditing to ensure the quality, cost, and delivery of power-related equipment and devices provided by suppliers. Taipower also revised relevant regulations to establish a quality assurance program for electrical equipment. It requires suppliers to develop the capacity to design and supply qualified products and to prevent noncompliance from design to services.

Electricity Suppliers


To ensure a stable supply of electricity and to enhance economic vitality and flexibility, the government lifted restrictions on private power producers and adopted Taipower’s avoidable costs generation as a pricing principle. Prior to 2016, Taipower was permitted to purchase thermal electricity generated by independent power producers (IPPs) in accordance with the announcement from the Ministry of Economic Affairs that allowed for the establishment of private power plants. The process works as follows: the Ministry of Economic Affairs first conducts qualification reviews, and qualified operators then submit their electricity prices for bidding before Taipower signs a contract with the winning bidder.

For the purchase of electricity generated through cogeneration and renewable energy, the procedure is governed by the Enforcement Rules of the Cogeneration System and the Renewable Energy Development Act. Taipower is obligated to purchase the electricity wholesale, but is not required to follow the bidding procedures outlined in the Government Procurement Act.

However, in January 2017, following the promulgation of the most recent amendments to the Electricity Act, the Ministry of Economic Affairs will no longer permit privately-owned power plant license applications. Taipower’s power supply capacity will be announced by the electricity industry's regulatory authority in assessing the power supply. When there is electricity demand, the procurement procedure will be initiated. Contracts will be reviewed and the starting price for bidding will be set. Then public bidding will be handled following the provisions of the Government Procurement Act. A public meeting will be held to explain the bidding process to potential suppliers that are interested in bidding. The bidding will be closed and finalized after a qualification and specification review, as well as bargaining and comparing prices. As of the end of 2020, Taipower has signed contracts with nine independent power producers (IPPs), 49 cogeneration power providers, and has 34,997 contracts for renewable energy including solar power, wind power, hydropower, and others. A full 55.1kWh of electricity was purchased from external sources in 2020.

Creating a Sustainable Supply Chain


Supplier Review Standards Pursuant to the Government Procurement Act


To ensure material quality, maintain power supply safety, and improve procurement efficiency, Taipower reviews the bidding documents of suppliers in keeping with the Government Procurement Act. If the Company has doubts about the contents of the documents provided by suppliers that participate in the bidding, it may notify the said suppliers and ask for further information. The procurement of electrical equipment (such as cables and gas-insulated switchgear, etc.) must also comply with pertinent government policies such as the Power Equipment Localization Policy. This essentially means that important components must be produced, assembled, or cut in domestic factories. Taipower evaluates supplier bids on this basis.

Process of Screening the List of Selectively Tendered Materials, Equipment and Qualified Suppliers of Taipower


Taipower has established General Principles of Reviewing Supplier Equipment Manufacturing Capacity in Selective Tendering as a supplier selection mechanism. Suppliers who are included on the list of qualified manufacturers and allowed to participate in the bidding process must obtain a Certificate of Manufacturing Capacity, and must provide a list of relevant equipment belonging to the company, an independent inspection report, an incoming material inspection, an independent inspection form, and maintenance plans, etc. In addition, the manufacturer's quality management system must be certified by the relevant local professional institutions to ensure the supplier meets execution capability and quality safety standards.

Process of Screening the List of Selectively Tendered Materials, Equipment and Qualified Suppliers of Taipower

Supplier Evaluations and Audits

Taipower conducts supplier evaluations based on its Application Guidelines for the Re-assessment of Electrical Equipment. Suppliers with Certificates of Manufacturing Capacity must conduct re-assessments before the expiration dates of their validity periods (up to three years) to maintain their qualifications.

Through the re-evaluation process, Taipower conducts a comprehensive evaluation of supplier manufacturing capacities, quality management systems, manufacturing equipment, and lists of equipment that require inspection, suppliers of components or raw materials, delivery conditions in the most recent three years, and improvement measures for misusing equipment. Suppliers that meet the requirements shall be issued Certificates of Manufacturing Capacity. When suppliers fail to meet the requirements, they are given a limited period in which they can propose improvement measures. Suppliers that fail to propose improvement measures without valid reasons are required to reapply for their Certificates of Manufacturing Capacity.

In 2020, Taipower strengthened its audits of material suppliers. Among the 156 qualified selective tendering suppliers, 31 were chosen for re-assessment which accounted for 20% of the suppliers. The results of all supplier reassessments met Taipower's requirements. In addition, the Company conducted inspections during the manufacturing process and on-site audits of suppliers a total of 456 times.




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