[Column] Protection Measures for Electricity Rate Hikes? ... Must First Present Standards for Oil Price Surges

[Asia Economy Reporter Moon Chaeseok] The government's energy policy, summarized as nuclear phase-out and eco-friendliness, has ultimately resulted in a "bill" of electricity rate hikes. Although the rationale is carbon neutrality and increasing the share of eco-friendly energy, it is unlikely to be free from criticism for increasing the burden on the public.

The core of the electricity rate reform plan announced by the Ministry of Trade, Industry and Energy on the 17th is to reflect fuel cost fluctuations such as international oil prices in the rates. There is no problem if the current low oil price situation continues, but if oil prices start to rise, the burden increases. For this reason, the ministry only reflected the 2021 outlook, which expects low oil prices, in the press release distributed the day before and made no specific mention of 2022 and beyond.

The concern is how much the burden on consumers and companies paying the rates will increase. Of course, the ministry has prepared safety measures to limit the adjustment rate to an increase or decrease of up to 3 KRW per kWh compared to the previous rate, and set upper and lower limits at 5 KRW, considering the possibility of oil prices rising indefinitely. They also stated they would actively utilize consumer protection measures in case of a sharp oil price surge.

However, it is unclear what the criteria for a sharp oil price surge are or what kind of protection measures will be implemented. Even in the manufacturing sector, where electricity costs are directly linked to profits, complaints arise that "there is no concrete plan on how to minimize the burden to some extent."

The ministry also did not provide a clear answer on this matter. In response to related questions, a ministry official gave only a general statement: "If raw material prices rise sharply due to an oil price surge, Korea Electric Power Corporation will request the government to calculate the fluctuation and reflect it in the rates, and we will prepare the basis for decision through consultation with price authorities."

In the ministry's explanatory materials regarding concerns about rate hikes, it only stated, "We plan to actively prevent sudden increases by utilizing consumer protection measures such as the government's reservation authority."

Projections on the direction of international oil prices are mixed. While some say "the oil peak (demand peak) has already passed," others believe "it will surge due to recovery in consumption." Goldman Sachs forecasts that the average oil price next year will reach $65 per barrel.

Before rebutting the possibility of electricity rate hikes closely related to people's lives as "excessive," it would be appropriate to first present specific details about the safety measures.

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