Korean government delays decision on raising power rates to next week

[Photos by Lee Seung-hwan]

The South Korean government has postponed a decision on raising electricity rates for the second quarter until the end of this month as it is in a dilemma over a hike to cover the snowballing debt at the state power utility after President Yoon Suk Yeol vowed to slow the pace of increase to ease the burden on households.

According to the Ministry of Trade, Industry and Energy and Korea Electric Power Corp. (KEPCO) on Monday, the ministry had planned to announce whether to raise electricity and gas rates and related details on Tuesday but it decided to delay its decision.

The industry ministry said that the delay came as it needed more time to discuss the matter with the Ministry of Economy and Finance based on the adjusted fuel price for the second quarter submitted by KEPCO last week. KEPCO is known to have proposed a hike similar to the first quarter at 13.1 won ($0.01) per kilowatt hour (kwh).

The two ministries are known to have initially reached a consensus on the need for an electricity rate hike.

KEPCO logged 32.6 trillion won in losses last year alone, up 26.8 trillion won from 5.8 trillion won in the previous year. KEPCO had reported to the National Assembly that electricity bills need to be raised by 51.6 won per kwh this year to resolve accumulated losses by 2026. A hike for the remaining quarters this year would be inevitable to meet that goal.

The plan, however, has gone up in the air after President Yoon said last month that the government will slow the pace of energy fee increase amid the high inflation.

Consumer prices in Korea gained 4.8 percent in February, slowing from 5.2 percent on-year increase in January. The hike in electricity, gas, and water prices, however, was still high at 28.4 percent.

Higher utility fees will place more burden on the households and small businesses when energy demand grows during summer season.

Experts, in the meantime, note that the government should raise the power rate as much as it can in the second quarter “to reduce variables in the second half of this year.”

“Electricity and gas prices must be raised in the second quarter when a rate hike weighs less on the public,” said Kang Cheon-gu, professor of energy resource engineering at Inha University. “Energy consumption would only fall when the rates are kept at an upward trend.”