KEPCO's "Snowball Deficit"... Government to Raise Industrial Electricity Rates

Vice Minister Park Il-jun "Changes Expected in Industrial Electricity Rates"
Cost Recovery Rate for Industrial Electricity Only in the 60% Range
Also Indicates Reform of Special Systems Such as Agricultural Electricity Rates

An electricity meter in a residential area of Seoul. [Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] The government is pushing for an increase in industrial electricity rates. This is based on the judgment that the cost recovery rate for industrial electricity, currently below 70%, must be raised to resolve Korea Electric Power Corporation's (KEPCO) deficit. The government plans to determine the extent of the increase through consultations with economic organizations.

Park Il-jun, Vice Minister of the Ministry of Trade, Industry and Energy, stated this during a meeting with the press corps on the 21st. Vice Minister Park said, "There will be changes to industrial electricity rates," adding, "The extent of the increase and the application period are still under discussion." He continued, "If places that use a lot of energy pay a little more attention to saving, the effect can be significant," and added, "Considering the ability to bear the cost, it is necessary to adjust electricity rates differentially for large-volume users."

The government's intention to raise industrial electricity rates is to increase the cost recovery rate and reduce KEPCO's deficit. According to the Ministry of Trade, Industry and Energy, the cost recovery rate for industrial electricity is only in the 60% range. While industrial electricity rates have been set much lower compared to international levels, KEPCO's fuel cost burden has steadily increased. In fact, as of 2020, industrial electricity rates were $94.8 per MWh, ranking 22nd among 34 OECD countries. Compared to advanced countries such as the UK ($147.1), Japan ($164.3), and Germany ($146), the rate is nearly 50 won cheaper per MWh.

The government also expects to resolve subsidy issues through the adjustment of industrial electricity rates. Previously, the American Iron and Steel Institute raised concerns in 2017, considering Korea's industrial electricity rates as government subsidies. It was pointed out that the Korean government had indirectly provided subsidies to the domestic steel industry by setting industrial electricity rates lower than international levels. Vice Minister Park explained, "There has always been an issue that the government is giving subsidies to companies through industrial electricity rates," adding, "This aspect is also reviewed annually in countries like the United States."

Emergency Energy Supply Countermeasures Task Force 1st Meeting, Deputy Minister Park Il-jun Speaking
(Seoul=Yonhap News) Reporter Kim Do-hoon = Park Il-jun, 2nd Deputy Minister of the Ministry of Trade, Industry and Energy, is presiding over the first joint public-private Emergency Energy Supply Countermeasures Task Force meeting at the Korea Electric Power Corporation Namseoul Headquarters in Yeongdeungpo-gu, Seoul, on the morning of the 1st of this month.
The task force, composed of teams for natural gas, oil, coal, and electricity response, plans to check energy price trends and supply status every 1 to 2 weeks and respond promptly in emergencies. 2022.9.1
superdoo82@yna.co.kr
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The Ministry of Trade, Industry and Energy holds the position that the increase in industrial electricity rates should be decided within this month if possible. Vice Minister Park said, "It is desirable that the decision on the industrial electricity rate increase be made together with the decision on the fuel cost linkage system for the fourth quarter within this month," adding, "We are consulting with price authorities regarding the extent and duration of the increase." The ministry also plans to consult with industry groups, economic organizations, and trade associations about the extent of the increase.

He also hinted at a reform of the special electricity rate system, with agricultural electricity as a representative case. According to KEPCO, the sales price of agricultural electricity last year was 45.95 won per kWh, less than half of residential electricity (109.16 won). Vice Minister Park said, "The cost recovery rate for agricultural electricity is about 25%," adding, "We are considering whether such a cost recovery rate aligns with public sentiment." He further noted, "Looking into the details, some large corporations in the top 30 groups also receive agricultural electricity," and added, "It is necessary to examine whether the special electricity rate system is functioning as originally intended."

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