South Korea lifts energy prices by 5.4% for Q2 after delay

Electricity meters installed in a residential area [Photo by Park Hyung-ki]

South Korea’s latest increase in electricity and gas prices will likely add to pressure on the country’s households and industries alike, as the global slowdown has hit the manufacturing sector, and the public faces growing energy demand well ahead of the summer season.

South Korean Minister of Trade, Industry and Energy Lee Chang-yang on Monday said that the government will raise electricity rates by 8 won to 154.6 won per kilowatt hour (kWh) for the second quarter. The increase is expected to cost a household of four members an average of 66,590 won ($49.68) per month, up by 3,020 won or 5.4 percent. Gas prices will also rise by 1.04 won to 20.73 won per megajoule (MJ). The rates will take effect Tuesday, according to the minister.

The government, however, also announced supportive measures to mitigate the impact of the energy price increases on the country‘s marginalized groups. Low-income households will be exempted from the hikes for one year and the electricity rates for agricultural use will be charged over three years.

Lee stressed the need for rate increase in the announcement. “The constant adjustments on electricity and gas prices seemed to fail to minimize rate hike factors,” Lee said in a statement. “Worsening financial conditions at Korea Electric Power Corp. and the Korea Gas Corp. have reached a level that could disrupt the soundness of their management and energy supplies so that the price hikes were inevitable.”

The Korean government’s price hikes, however, will put more strains on the industries that are already under severe stress.

According to industry sources on Monday, Samsung Electronics Co. will end up paying an increment of 300 billion won in addition to power prices this year amid a widespread slowdown in the global chip industry. Samsung Electronics, as the country‘s largest electricity consumer, used 20.55 billion kWh of energy last year.

SK hynix Inc., which used 10.01 billion kWh of electricity, will also likely pay 200 billion won more this year.

The price hike is feared to add pressure even on the steel industry. Korean steel manufacturers have turned to electric-arc furnaces that use ferrous recycled scrap to make steel, resulting in lower carbon emissions. The annual amount of electricity used in the electric furnaces by Hyundai Steel Co., the country’s leading company in terms of use in electric furnaces, was measured at 7 billion kWh. “A rise by 8 won per kWh is expected to increase our energy costs by 50 billion won,” said an unnamed source from Hyundai Steel.