"94% of SMEs Feel the Burden Even Under the Current Electricity Tariff System"

Korea Federation of SMEs Urges Establishment of 'Electricity Rate Plan Exclusively for Small and Medium Enterprises'

[Asia Economy Reporter Kim Cheol-hyun] The Korea Federation of Small and Medium Business (Chairman Kim Ki-moon) announced on the 23rd that it urges the supplementation of the 'Electricity Rate System Reform Plan' finalized and announced on the 17th. The Federation agrees with the government's energy policy direction aimed at establishing a carbon-neutral foundation to overcome the climate crisis, but expresses regret over the recent electricity rate system reform that ignores the realities of small and medium enterprises (SMEs), and demands the preparation of supplementary measures such as establishing a dedicated electricity rate system for SMEs.

According to the Federation, 94% of SMEs feel the burden of electricity charges even under the current electricity rate system, and especially in root industries such as casting and heat treatment, where electricity costs account for more than 12% of manufacturing costs, a significant impact is expected if electricity rates increase. During this year's National Assembly audit, it was also revealed that SMEs struggling due to the novel coronavirus infection (COVID-19) have paid electricity rates 17% higher than large corporations over the past five years, amounting to an additional burden of about 11 trillion won, the Federation added. Large corporations have been using off-peak electricity with lower purchase prices by utilizing energy storage systems (ESS) and adjusting operations, but SMEs use mid-peak time rates, which are relatively higher, due to equipment composition and operational adjustment constraints.

In response, the Federation emphasized the need to introduce a 'dedicated electricity rate system for SMEs' to resolve the rate gap between large and small-medium enterprises, including ▲applying off-peak rates instead of mid-peak rates during Saturday daytime when electricity demand is low ▲applying spring and autumn rates instead of summer and winter rates in June and November when power reserve rates are sufficient ▲and exemption from the Electricity Industry Infrastructure Fund charge (currently 3.7% of electricity rates). Additionally, it requested the improvement of energy usage conditions for SMEs by providing free distribution of energy-efficient facilities such as ESS to SMEs facing difficulties in installation due to cost and other issues.

Kang Dong-han, Chairman of the Korea Forging Industry Cooperative, said, "While we agree with the government's carbon neutrality policy promotion, it is realistically difficult for root companies to reduce energy usage immediately due to uncontrollable factors such as the nature of the equipment itself and order patterns," adding, "to enhance fairness in the industrial electricity rate system between large and small-medium enterprises and to reduce the electricity cost burden on SMEs, supplementary measures including the introduction of a dedicated electricity rate system for SMEs and free distribution of ESS should be promptly prepared."

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