Revision to Prohibit Use of Power Fund for Renewable Energy... Government Says "Consultations Haven't Even Started"

Korea Hydro & Nuclear Power's 'Nuclear Phase-out Cost Compensation' Criticized as 'Government Petty Cash'
People Power Party Rep. Gu Ja-geun Introduces Electricity Business Act Amendment on 16th
Renewable Energy Support Basis Removed... Fund Rate Reduced from 6.5% to 3%

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Moon Chaeseok] A bill to reduce the electricity industry infrastructure charge, which is virtually considered a quasi-tax, and to delete the basis for supporting renewable energy has been proposed, but it is expected to face difficulties in passing. The government showed a cautious response, stating that it has not yet started consultations with the National Assembly.

On the 16th, Gu Ja-geun, a member of the People Power Party belonging to the National Assembly's Industry, Trade, Energy, Small and Medium Enterprises Committee (Sanjungwi), introduced a revision bill to the Electricity Business Act that lowers the electricity industry infrastructure fund charge rate from a maximum of 6.5% to 3%.

The electricity fund imposes and collects an amount equivalent to 3.7% of the electricity bill, so it can be regarded as a quasi-tax. It was established in 2001 to build the foundation of the electricity industry.

In this revision bill, Representative Gu deleted the clause supporting renewable energy. He pointed out that under the Moon Jae-in administration, about half of this year's electricity fund, 48.74%, was used to support new and renewable energy.

Earlier, in July, the Ministry of Trade, Industry and Energy announced a legislative notice for a partial amendment to the Enforcement Decree of the Electricity Business Act, which included the basis for cost compensation to electricity business operators such as Korea Hydro & Nuclear Power, but it faced heavy criticism.

It was criticized for allowing the minister to recognize costs incurred by electricity business operators during the implementation of energy policies deliberated and resolved at the Cabinet meeting, such as the early shutdown of Wolseong Nuclear Power Plant Unit 1 and the cancellation of new nuclear power plant construction plans, and then compensating those costs with the fund.

There was controversy over whether it is appropriate to compensate the so-called 'nuclear phase-out costs' with the electricity fund, which is equivalent to a quasi-tax. There were also criticisms that it is a "petty cash" the government uses whenever necessary.

Passing the bill does not seem easy. This is because ruling party members of Sanjungwi are actively proposing laws to promote renewable energy.

For example, Song Gap-seok, the ruling party's secretary of Sanjungwi from the Democratic Party of Korea, introduced a revision bill to the Electricity Business Act in July that allows Korea Electric Power Corporation (KEPCO) to engage in both renewable energy generation and sales.

Another member of the same party, Kim Seong-hwan, also proposed a revision bill enabling 'Power Purchase Agreements (PPA)' where demand companies can directly trade electricity with renewable energy producers without going through KEPCO.

The bill lowers the fund rate and establishes a fund review committee to oversee fund management. It argues that the burden on the public, hit hard by the COVID-19 pandemic, should be eased.

In March, there were talks about lowering the rate for the first time in 15 years, but the Ministry of Industry explained that it was "unfounded."

Additionally, the bill deletes "important projects determined by presidential decree" from the scope of fund utilization.

As a problematic case, it cited the "Top-Grade Efficiency Home Appliance Rebate Project," which refunds 10% when purchasing eligible home appliances.

The project has received praise for contributing to domestic demand activation but also criticism that benefits do not properly reach low-income groups who pay the fund.

Representative Gu said, "The necessity of the electricity fund for carrying out public interest projects is acknowledged," and added, "For rational operation, it is necessary to strengthen the electricity fund management system and utilize the fund appropriately for purposes such as welfare discounts for residential use."

An official from the Ministry of Industry said, "If Sanjungwi convenes a meeting during the temporary session of the National Assembly and officially proposes to start consultations, discussions will begin thereafter," and drew a line by saying, "The government has not reviewed it first."

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