This file photo taken on Sept. 31, 2022, shows electric meters set up at a residential building in Seoul. (Yonhap)
SEOUL, Dec. 30 (Korea Bizwire) — South Korea will raise first-quarter electricity rates by the largest margin in about four decades on high global energy costs and mounting losses of the state utility company, the industry ministry said Friday.
The government decided to jack up the electricity rates for consumer and industrial use by 13.1 won (US$0.01) per kilowatt hour (kWh) for the January-March period next year, compared with a 2.5 won hike per kWh in the fourth quarter of this year, according to the Ministry of Trade, Industry and Energy.
For the whole of 2022, the rates rose 19.3 won per kWh, as the government froze the rates for the first and second quarters amid the COVID-19 pandemic and high inflation.
The planned fee hike is estimated to cost a four-member household at least 4,022 won more on average per month and is forecast to drive up the country’s overall consumer inflation by 0.15 percentage point, according to the ministry.
The government earlier estimated next year’s inflation at 3.5 percent, and the figure already factored in the planned fee hikes, it added.
In detail, the adjusted unit fuel cost — a key part of the country’s electricity rates — will go up by 9.8 won per kWh, and the additional fee linked to climate change will rise 1.7 won per kWh.
It is the biggest quarterly increase since the 1980s, when the country felt the pinch of the global oil crises, officials said.
In 2021, South Korea adopted a flexible electricity rate system, under which the billing system is adjusted every three months, depending on global prices of liquefied natural gas, coal and crude oil.
But the government decided to freeze the first-quarter natural gas prices to minimize the burdens on the people, particularly during the winter.
The ministry said the fee hike is inevitable in order to cope with soaring fuel prices and to normalize the management of the debt-ridden Korea Electric Power Corp. (KEPCO).
“The country has failed to appropriately reflect high global energy prices in domestic electricity and gas rates, causing state energy firms to suffer mounting losses. It has raised concerns about the stable energy supply and negative impacts on the domestic bond market and the broader economy,” Minister Lee Chang-yang told a press conference.
“The government will rationalize the fees in phases to address the debt issues by 2026,” he added.
The state-run Korea Electric Power Corp.’s headquarters building in Naju, South Jeolla Province. (Yonhap)
During the first 11 months of this year, South Korea’s energy imports spiked $74.8 billion on-year to $174.1 billion on high energy prices.
KEPCO logged a record high net loss of 21.83 trillion won for the January-September period, and the figure for the whole of 2022 is expected to surpass 30 trillion won. Last year, the company reported a net loss of 1.12 trillion won.
In the wake of record losses, KEPCO came up with a series of self-rescue measures, including the restructuring of overseas businesses, property sales and other cost-cutting moves.
But those plans are far from enough to overcome the crisis under the current global energy situation, the ministry said.
In a report submitted to the National Assembly, the government called for a 51.6 won electricity rate hike per kWh next year.
The first-quarter fee hike is expected to create some 7 trillion won of additional revenue for KEPCO, according to the ministry.
In an effort to ease burdens on vulnerable groups, the government came up with several supportive measures.
Some 3.5 million low-income households will be exempted from the planned higher rates, and various energy subsidies and a cut in gas rates will be expanded next year.
The government will increase the budget for facility improvement for smaller companies and farmers to boost energy efficiency, according to the ministry.
(Yonhap)
