[Exclusive] Preparing for the Imminent 'High Oil Price Bills'... 500 Billion Won Energy Voucher for Vulnerable Groups

Energy Supply Risks Expected in Q3 Due to Middle East Situation
Prolonged High Oil Prices Could Impact Electricity Market
Support Measures to Prevent Burden on Vulnerable Groups

With international oil prices fluctuating due to the situation in the Middle East, the government has projected that energy supply risks could intensify starting from the third quarter of this year. To prevent the burden on vulnerable groups from increasing due to rising energy costs, the government is considering welfare cards, including an "energy voucher" program worth 500 billion won.

According to the Democratic Party of Korea and the Ministry of Climate, Energy and Environment on March 13, the government stated at the National Assembly’s Climate, Energy, Environment, and Labor Committee (Environment and Labor Committee) meeting held the previous day that, for this week (March 9–15), the country’s power supply capacity reached 86.8 gigawatts (GW) and the maximum demand was 73.8GW, indicating that domestic electricity market prices are expected to remain stable.

According to the Ministry’s "Weekly Electricity Supply and Demand Outlook for March," the power supply capacity for the third week (March 16–22) and fourth week (March 23–29) is projected to be 91GW and 90.3GW, respectively, while the maximum demand is forecast at 77.5GW and 75.3GW. Reserve power is expected to gradually increase, from 13GW this week to 13.5GW in the third week and 15GW in the fourth week. The Ministry commented, "Temperatures in March are expected to be higher than average," adding, "Even if we see a peak in the third week, reserve capacity is expected to remain stable."

However, the government analyzed that if high oil prices persist for an extended period, they will affect energy supply and costs starting from the third quarter. This is because it typically takes three to six months for oil price fluctuations to be reflected in electricity market prices. When oil prices rise, the prices of bituminous coal, liquefied natural gas (LNG), and oil products also increase, which is then transmitted to electricity market prices.

The government has decided to support energy welfare so that even if electricity rates rise, vulnerable groups will not feel a financial burden. An official from the Ministry of Climate, Energy and Environment told The Asia Business Daily, "The budget for last year’s energy voucher program, which is applied until May this year, stands at 481.5 billion won, while this year’s budget is 494 billion won," adding, "We will monitor the pace of budget exhaustion and, if additional budget discussions (supplementary budget) proceed, we will consider extra support if necessary."

On this day, the ruling and opposition parties also shared plans to reduce LNG power generation in the short term and expand nuclear and coal-fired power generation. For nuclear power plants, the government will focus maintenance and inspection resources to ensure the swift restart of facilities currently undergoing scheduled preventive maintenance. Easing the restrictions on coal-fired power generation imposed by the seasonal fine dust management system and securing additional bituminous coal reserves were also considered.

Measures to block the ripple effect of rising fuel prices being passed onto consumers were also discussed. As a first step, the government will consider introducing strategic LNG volumes and, if necessary, will focus on stabilizing gas prices by adjusting LNG supply. In addition, further measures such as the fuel-specific individual consumption tax and tariff reductions for power generation fuels implemented in 2022, as well as the system marginal price (SMP) cap, may also be employed.

Kim Jooyoung, the Democratic Party secretary of the Environment and Labor Committee, told reporters, "The ruling and opposition parties urged the government to provide comprehensive energy welfare support to prevent public inconvenience due to power supply problems and to ensure that the burden on vulnerable groups does not increase, in response to the risks in domestic power supply resulting from soaring energy prices and the unstable international situation caused by recent developments in the Middle East."

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