"Kepco Embarrassed by Ruling Party's Demand to Cut Electricity Bills for Low-Income Households"

[Asia Economy Reporter Moon Chaeseok] The ruling party has put Korea Electric Power Corporation (KEPCO) in a difficult position by demanding the government reduce electricity rates for low-income households in preparation for the summer heatwave. KEPCO was coordinating whether to discuss electricity rate hikes at the board meeting at the end of this month, but the political circle has come out with demands that are completely opposite.

On the 10th, Kim Tae-nyeon, the floor leader of the Democratic Party of Korea, urged, "The government should consider ways to ease the electricity bill burden on low-income households in preparation for the record-breaking heatwave."

He demanded the government implement electricity rate reductions and power supply measures, emphasizing the need to prepare safety measures for heatwave-vulnerable groups such as elderly living alone and basic livelihood security recipients, as the heatwave overlaps with the COVID-19 pandemic. There are also speculations in political circles that KEPCO may push for electricity rate reductions for low-income households as early as next month.

Regarding this, KEPCO stated, "We have not yet received any requests from the government," and only gave the general position that "electricity rate policies are basically implemented in consultation with the government."

However, internally, the situation is difficult. KEPCO is currently trying to abolish the essential usage discount system, which offers discounts to households that use less electricity.

The essential discount is a system that reduces electricity bills by up to 4,000 KRW per month (2,500 KRW for apartments) for low-consumption households using less than 200 kWh per month (based on general housing). Since low electricity consumption does not necessarily coincide with low-income households, questions have been raised about its effectiveness.

Last year, KEPCO announced it would prepare a plan to reform the electricity rate system by June this year and improve the essential discount system. There is a possibility that this agenda will be discussed at the KEPCO board meeting on the 26th. A KEPCO official explained, "There are irrational parts in the essential discount, and we intend to correct them (at the board meeting)."

There is also a method to temporarily apply the residential energy-saving discount, which expired earlier this year, but its feasibility is extremely low. This system offers a 15% discount if electricity consumption is reduced by more than 20% compared to the average usage, but KEPCO's stance is that "there will be no revival."

The most recent case where KEPCO adjusted summer electricity rates under pressure from the political circle was the progressive rate reform in August 2018. As a result of consultations between the ruling party and the government, the upper limits of the first and second tiers were temporarily raised.

According to the progressive rate system finalized at the end of 2016, electricity rates are applied differentially at 93.3 KRW per kWh for the first tier (0?200 kWh), 187.9 KRW for the second tier (201?400 kWh), and 280.6 KRW for the third tier (over 400 kWh). In 2018, the upper limit of the first tier was temporarily raised to 300 kWh, and the second tier to 500 kWh, reducing the electricity bill burden on low-income households. From KEPCO's perspective, this meant bearing financial losses.

That year, KEPCO posted an operating loss of 208 billion KRW. Although it cannot be said that this was solely due to the summer progressive rate reform, it was indeed a burden for KEPCO, which had recorded operating profits of 12.016 trillion KRW in 2016 and 4.9532 trillion KRW in 2017.

Last year, KEPCO suffered an operating loss of 1.2765 trillion KRW, marking two consecutive years of operating deficits. According to KEPCO's consolidated financial statements submitted to the Financial Supervisory Service for the first quarter, electricity sales revenue (sales) amounted to 14.3044 trillion KRW, accounting for 86.4% of total revenue (sales) of 15.0931 trillion KRW.

This content was produced with the assistance of AI translation services.