Vice Minister for Trade and Energy Han Jin-hyun, alongside Vice Minister Lee Suk-joon of the Ministry of Strategy 

and Finance, explains the background of electricity rate increases at a news conference at 

the government complex in downtown Seoul on Nov. 19.(Photo: MOTIE)

The government announced a plan to raise electricity charges for household use by an average of 2.7 percent and those for industrial use by 6.4 percent, effective Nov. 21.

The Ministry of Trade, Industry and Energy (MOTIE) released an electricity charge increase plan on Nov. 19. The latest raise in electricity charges comes some 10 months after the government increased electricity rates by an average of 4 percent this past January. It is the sixth one since August 2010. 

MOTIE estimates that urban households using an average of 310kWh monthly will be charged with 50,130 won, an increase of 1,310 won from the previous bill of 48,820 won. Electricity charges for department stores and buildings will go up 5.8 percent, while those for street lamps and nighttime use will be raised by 5.4 percent. Electricity charges for agricultural use will increase 3.0 percent, but those for educational use — for primary and secondary schools, universities, and other educational institutions — will remain unchanged. 

Explaining the background of electricity rate increases at a news conference, Vice Minister for Trade and Energy Han Jin-hyun said, “The government has decided to restructure the electricity charge system to rationalize energy consumption.” The latest electricity rate increases are forecast to save some 800,000kW of electricity, equivalent to the capacity of a nuclear power unit, MOTIE officials said. 

The government’s electricity rate increase plan is targeted at electricity rates for industrial use. Despite opposition from industrial circles, the government has decided to raise electricity rates for industrial use by a combined 11 percent so far this year — an additional 6.4 percentage points on top of a 4.4 percent raise this past January. MOTIE officials stress the need for rationalizing electricity rates for industrial use to stem electricity demand. 

The late government electricity rate system calls for widening differentials between peak time and non-peak time electricity charges to reduce peak time electricity demand. For instance, peak time electricity rates for peak demand days, such as the days around next Jan. 10, will soar to 564.4 won per kWh 12.9 times as much as non-peak time rates. The differentials between peak time and non-peak time rates will be widened to 15.6 fold during summer. 

Vice Minister for Trade and Energy Han Jin-hyun, alongside Vice Minister Lee Suk-joon of the Ministry of Strategy 

and Finance, explains the background of electricity rate increases at a news conference at 

the government complex in downtown Seoul on Nov. 19.(Photo: MOTIE)

Large-sized businesses can opt for an electricity rate regime in which a peak time rate of 293.8 won per kWh will be charged for only three hours out of the total peak time of six hours, and 108.5 won for the remainder, as with the ordinary rate during the non-peak time hours. In this case, they may turn to their own in-house Bunker C oil-fired power plants during peak-time hours. 

The rationale behind imposing surcharges during peak-load hours is the need for stemming a soaring electricity demand in Korea, the officials said. Korea saw electricity demand soar 19.3 percent in 2012 compared to 2008, as opposed to advanced countries whose electricity demand has declined. Japan, the United States, and Germany saw electricity demand drop by 4.6 percent, 1.9 percent, and 2.7 percent, respectively. The reality is that Korea did not achieve extraordinary economic growth during the cited period — cheaper electricity rates caused electricity demand to soar. The government has curbed an increase in electricity rates, even though kerosene, gas, and other energy resource prices have fluctuated according to global market prices. Cho Young-joon, director in charge of energy resources policy at MOTIE said electricity charges are set below unit production costs, causing public entities to be burdened with huge debts — transferring the current generation’s electricity costs to the next generation to bear. Korea Electric Power Corp. (KEPCO) announced plans to take self-rescue measures to lower losses the company has suffered, which the government demanded as a precondition for raising electricity rates. KEPCO plans to dispose of the site of its headquarters and take others steps, including the returning of all pay raises for general managers or higher officials, which have been made or will be made during the period between 2013 and 2014. KEPCO said the upcoming self-rescue steps will result in saving a combined 6 trillion won.