This file photo taken May 14, 2023, shows electric meters set up at a residential building in Seoul. (Yonhap)
SEOUL, May 15 (Korea Bizwire) — South Korea will raise second-quarter electricity rates and gas prices by 5.3 percent on-year on high global energy costs and mounting losses of state utility companies, the industry ministry said Monday.
The government will jack up the electricity rates for consumer and industrial use by 8 won (US$0.01) per kilowatt hour (kWh) for the second quarter, compared with a 13.1 won increase per kWh in the first quarter of this year, according to the Ministry of Trade, Industry and Energy.
The fee hike is estimated to cost a four-member household around 3,000 won more on average per month.
The government also decided to raise the second-quarter gas prices used for cooking and heating by 1.04 won per megajoule after freezing them in the first quarter, which will cause a four-member household to pay about 4,400 won more per month, the ministry said.
The second-quarter rates will take effect Tuesday and will not be applied retroactively.
The government was supposed to finalize the second-quarter utility rates in March but postponed the decision, citing the need to gather public comments further as it had sought ways to minimize people’s economic burdens and to better manage inflation amid public outcries over spikes in heating and energy bills during the winter.
Industry Minister Lee Chang-yang stressed that the hikes are badly needed, given high global energy prices amid the Russia-Ukraine war and their impact on the management of the Korea Electric Power Corp. (KEPCO) and the Korea Gas Corp. (KOGAS).
“Worsening financial conditions of the energy public firms are feared to disrupt stable supplies of electricity and gas. … We cannot rule out a situation where their financial crisis could spread to the financial market and further to the overall economy,” Lee said in a public statement.
“Their self-rescue measures alone are far enough to overcome the current crisis,” he added.
This photo taken May 12, 2023, shows the headquarters of the state-run Korea Electric Power Corp. in the southwestern city of Naju. (Yonhap)
In 2022, KEPCO reported a record operating loss of 32.63 trillion won, more than quadruple from a year earlier due to limited electricity rate hikes amid high inflation and an economic slowdown.
It also logged 6.18 trillion won of loss in the first quarter of this year.
KOGAS had about 11.6 trillion won in uncollected payments as of end-March, sharply up from 1.8 trillion won in 2021 and 8.6 trillion won in 2022.
In an effort to address financial woes, the two utility firms put forth a set of reform measures, such as property sales, restructuring overseas businesses and freezing workers’ wages.
The planned increase is expected to help ease the utility firms’ financial difficulties, though the adjustment is still far from enough to fully reflect global energy prices, according to officials.
In a report submitted to the National Assembly, the government called for a 51.6 won electricity rate hike per kWh this year.
To mitigate the impact of the hikes on energy-vulnerable groups, the government announced supportive measures after consultations with the ruling People Power Party.
Low-income households will be exempted from the rate hikes for one year, and small-sized merchants and manufacturers in major industries will be allowed to pay the bills in monthly installments.
The government also decided to expand its energy voucher and discount programs, as energy demand is expected to grow in summer.
(Yonhap)
