Korea may review another electricity rate hike as KEPCO’s debt exceeds $150 bn

[Photo by Yonhap]

The South Korean government is reviewing whether to carry out an additional hike in electricity rate as the entire debt of the state-run utility firm, Korea Electric Power Corp. (KEPCO) has surpassed 200 trillion won ($150 billion).

“We may need to prudently consider an adjustment in electricity fares if possible,” Prime Minister Han Duck-soo told lawmakers at an interpellation session at the National Assembly last week.

The government, however, has not yet launched discussions on a rate hike in the near future, with some calling on KEPCO to engage in self-efforts to improve its finances.

Bang Moon-kyu, candidate for the Minister of Trade, Industry and Energy, told reporters last month that KEPCO should focus on self-rehabilitation.

Experts, on the other hand, see a rate hike should be imminent given the present circumstances.

They argue that the current power rate does not adequately reflect international energy prices, such as natural gas and coal, which are used for power generation.

Electricity bills have increased nearly 40 percent over five sessions from last year but concerns still persist as Brent crude oil prices have exceeded $90 per barrel and the local currency remains steadily above 1,300 won per dollar.

Kang Seung-jin, professor emeritus of Tech University of Korea, stressed that the government needs to convince the public that the cause of electricity rate increases lies in the rising international energy prices.

“People need to understand that electricity costs more than what they pay now,” he said.

Lee Sang-jun of Seoul National University of Science and Technology said that “it is time to rigorously assess the costs incurred and decide on another rate hike if necessary.”

Lee added that the focus should now be on how to support small business owners and low-income households instead of discussing whether or not to raise the electricity rate.

Some argue that a power rate hike may be inevitable to respond to climate change as well.

“In some advanced economies like Germany, the costs of expanding renewable energy are reflected in electricity bills,” Lee said. “If consumers do not bear the cost for carbon neutrality, it will ultimately be passed on to the future generation.”