The Ministry of Knowledge Economy (MKE) approved a plan to raise electricity charges an average of 4.9 percent effective Aug. 6.

The announcement of the rise in electricity charges came shortly after the board of directors of Korea Electric Power Corp. (KEPCO) on Aug. 3 agreed to do so, with additional increases being considered within this year. 

The approved plan calls for raising electricity charges for households, SMEs, and large companies by 2.7 percent, 3.9 percent, and 6.0 percent, respectively. The electricity charges for educational and farming use, which have remained unchanged for the past 11 years, have been raised by 3 percent. For instance, a household that had an electricity bill of 40,000 won for using 300kWh of electricity will now be charged an additional 1,200 won. 

Even though crude oil and other fuel cost hikes could be a cause enough to raise electricity charges by more than 10 percent, the government decided to minimize the raise in electricity charges in consideration of the competitiveness of Korean industries, which are facing external and internal economic hardships, and the general public’ s financial burden, an MKE official said. 

The MKE estimated that the latest rise in electricity charges would push up the consumer price index, the producer price index, and the production cost of manufacturing industries by 0.056 percentage points, 0.128 percentage points, and 0.07 percentage points, respectively. The ministry also projected that the increase could lower the summer peak load by approximately 850,000kW.  

Initially, KEPCO held a board of directors meeting on July 9 in which it proposed that electricity charges should be raised by 10.7 percent to recoup a loss the Korean utility company will suffer during the current business year due to the gap between electricity production costs and charges. The government, however, rejected the proposal. At that time, the government recommended that KEPCO hold the increase in electricity charges to less than 5 percent in consideration of its effects on general price hikes. On July 17, KEPCO received a document from the Electricity Regulatory Commission, which demanded that raising electricity charges by steeper margins should be put off until general price conditions and the global economic situation are restored to stable levels.

During the board of directors’ meeting on July 9, KEPCO made it clear that the utility company would not reflect the accumulated losses it had suffered due to the gap between electricity production costs and charges during the previous business years while considering the electricity charge increase, and the company will save more than 1.1 trillion won in production cost reductions during this year as part of efforts to recoup the losses. 

ELECTRICITY IN SHORT SUPPLY 

The nation was put on an emergency footing against a shortage of electricity as power demand has skyrocketed due to a spell of sultry heat that hit the nation.

The government announced the “caution” stage, the second level of the five-stage warning system against power shortage, at around 11 a.m. on Aug. 6 for the first time since the Sept. 15, 2011 power cut, as electricity reserves fell below the 3 million kW barrier. 

Following the issuance of the caution stage, lowering voltage and the suspending of some industrial sites allowed electricity reserves to return to previous stable levels, but fears of an electricity shortage prevailed. 

MKE Minister Hong Suk-woo said despite demand management, the power demand-supply situation was feared to not be completely within a stable footing. He appealed for the public to restrain from using electricity and industries and businesses to reshuffle their operations in order to voluntarily join forces in lessening electricity peak loads.

Figures released by the government and power companies showed that Korea saw the electricity consumption rate surge 10.1 percent in 2010, far above the economic growth rate of 4.8 percent in 2011. Korea’ s per capita electricity consumption soared five times as much as the average of the 34 OECD member countries. 

As electricity is in short supply, the government decided to resume the operation of Kori Nuclear Power Unit 1, which had been suspended because of controversies over its safety. The reopening of Kori Unit 1 is expected to add 580,000 kW to the nation’ s electricity production, but fears are mounting as the power supply-demand situation is likely to get worse as many people return to normal life from summer vacations in the middle of August, touching off a surge in power consumption, government officials and industry analysts said.