Differential electricity rates to be charged by region

Electricity meters are installed in an office building in downtown Seoul. Taehyung Cho Reporter

The government is preparing to introduce a "differential electricity rate system by region," which allows different electricity rates to be set by region. If the system is applied, electricity prices in the Seoul metropolitan area, which mainly consumes electricity, may rise, while those in areas where power plants are concentrated may fall. However, it is pointed out that it is important to design a sophisticated system, as relatively remote rural areas may face equity issues, such as higher electricity distribution costs, which could lead to higher electricity bills.

According to the government, the Ministry of Trade, Industry and Energy has ordered a service to comprehensively review the differential electricity rate system by region. The move comes after the passage of the passage of the Special Act on Revitalization of Distributed Energy, which contains the basis for implementing the differential electricity rate system, in May last year.

The imbalance between power generation and consumption has been criticized for some time. Electricity consumption in Seoul and Gyeonggi Province exceeds 30 percent of domestic electricity consumption, but major power plants were concentrated in areas far from the metropolitan area, such as South Chungcheong and Gangwon Provinces. The provinces suffer to generate and send electricity to the Seoul metropolitan area, but there is a problem that the electricity rate system applies the same to the provinces.

If the place that mainly consumes and produces electricity is different, a huge amount of electricity transportation costs are incurred. This is because long transmission lines and high-voltage transmission towers need to be built to bring electricity from power plants to the metropolitan area. Accordingly, the U.S., U.K., Australia, and other countries are also reflecting the costs incurred in the long-distance transmission process in electricity rates.

There are observations that if the differential electricity rate system is introduced through the revision of subordinate laws in conjunction with the full implementation of the Special Act on Revitalization of Distributed Energy in June, it will help to resolve the imbalance in electricity supply and demand by region. Companies that use a lot of electricity, such as data centers, may also find it more attractive to locate local areas near power plants than in the Seoul metropolitan area, where electricity prices are higher.

According to data released by the Korea Environment Institute, when the costs of electricity transmission and distribution are differentiated, it is estimated that those for the metropolitan area will rise by 0.34 won per kWh and the non-metropolitan areas will fall by 0.48 won. However, the introduction of the system can raise equity issues. If rates are charged based on metropolitan cities, not only coastal areas, such as Dangjin, where power generation facilities are concentrated, but also inland areas will benefit from the rate reduction.

When all costs, including the distribution cost, are reflected in the system, there may be factors that could cause rate increase in rural areas with a relatively small population. Local areas near power plants have higher distribution costs but lower transmission costs, and on the contrary, the Seoul metropolitan area has lower distribution costs but higher transmission costs.

The Ministry of Trade, Industry and Energy said it plans to collect various opinions, including from experts, in time for the implementation of the Special Act on Revitalization of Distributed Energy in June. An official from the ministry said, "There are various opinions on the system, so a public discussion process is necessary," adding, "We plan to go through the opinion gathering process in time for the implementation of the special act."

※This article has undergone review by a professional translator after being translated by an AI translation tool.