SEOUL, March 31 (Korea Bizwire) — The ruling People Power Party (PPP) and the government agreed to temporarily hold off raising electricity and gas bills but reaffirmed that rate hikes are “inevitable,” a ruling party lawmaker said Friday.
The decision was made in a policy consultation meeting amid concerns that a hike in utility fees may add onto economic burdens on the people amid high inflation and an economic slowdown.
Rep. Park Dae-chul, the PPP’s chief policymaker, said the government will decide on the rate hike after making additional assessments of international energy prices and discussions with experts.
Park still said that the ruling party and government reached a consensus that the rate hike cannot be further looked upon.
“We again reaffirmed that a hike in electricity and gas bills is inevitable,” Park said. “But more discussion is needed on the timing and scope of the hike among multiple options suggested by the industry ministry.”
The government jacked up the electricity rates for both consumer and industrial use for the first quarter by 13.1 won (US$0.01) per kilowatt hour (kWh), the sharpest increase in about four decades, while it froze the first quarter natural gas prices to minimize the burden on the public, particularly during the winter.
The move came as the Korea Electric Power Corp. (KEPCO) suffered a record high operating loss of 32.63 trillion won last year, more than quadruple on-year, amid limited electricity rate hikes and soaring global fuel prices.
In 2022, the electricity rate rose 19.3 won per kWh, with the government freezing the rates for the first and second quarters of the year amid the COVID-19 pandemic and high inflation.
In a report submitted to the National Assembly, KEPCO called for rate increases of 51.6 won per kWh this year.
The government also stressed the need to raise gas bills, as the Korea Gas Corp. had about 5 trillion won of uncollected payments last year.
But President Yoon Suk Yeol said last month that the government plans to freeze public utility fees in the first half of this year to help ease people’s economic burdens.
“The electricity and gas rate hikes are inevitable, as the financial status of energy public firms will worsen to hurt the country’s stable energy supplies if energy rates continue to come below production costs. But the government will also make sure that the priority should be on minimizing public burdens,” the industry ministry said in a release.
Industry Minister Lee Chang-yang earlier said the government needs to take steps to “normalize energy rates in phases in accordance with market principles,” while pushing for the transition to a low-consumption and high-efficiency structure, noting that global natural gas prices skyrocketed as much as 10 times due to the Ukraine crisis and other factors last year.