President Kim Jong-kap of Korea Electric Power Corp. (KEPCO). (Photo: KEPCO)

The government has decided to defer electricity payments for about 5 million small business owners and low-income households by three months. An electricity charge reduction plan was once considered, but it failed to materialize.

The reason is that the additional burden could not be transferred to Korea Electric Power Corp., which is grappling with the worst-ever management crisis, and the government cannot afford to secure sufficient funding.

The government and KEPCO decided to delay the payment period of electricity bills issued from March 18 to those in the most vulnerable income bracket for three months. The step is one of the measures taken to relieve the burden of electricity charges, confirmed during the 3rd Emergency Economic Meeting on March 30.

The deferred electricity charge bills can be paid in installments by the end of this year after a three-month period, so the step effectively delays payments for a maximum of seven months, the Ministry of Trade, Industry and Energy said.

The prospective beneficiaries of the deferment are 3.2 million owners of small businesses each with five or fewer employees, as well as 1.57 million low-income households.

The government estimates that the deferred electricity charge fees amount to 1.257 trillion won. The financial cost related to the deferment will be shouldered by KEPCO. The calculation is based on the fact that small business owners and low-income households pay 125,000 won and 20,000 won per month on average for electricity, respectively.

Support worth 1.5 trillion won, related to electricity charges, was given in the form of discount measures last year, but such steps are missing this year, a MOTIE official said.

If KEPCO were in a stable management status, the power company would have reduced electricity charges.

If KEPCO gave a 1 percent discount in electricity charges, the power company should shoulder a financial burden worth about 500 billion won. When the Middle East respiratory syndrome (MERS) hit the nation in 2015, the government and KEPCO lowered electricity charges on a temporary basis.

KEPCO is suffering from huge operating losses. The power company chalked up 12.001.6 trillion won in operating profit in 2016, but the government’s energy paradigm shift to wean nuclear power energy from the nation forced the power company to log operating losses for the second straight year.

KEPCO posted 1.356.6 trillion won in operating losses last year, the biggest-ever deficit in 11 years. KEPCO saw debt ratio surging from 143.4 percent in 2016 to 186.8 percent last year.

Meanwhile, KEPCO claimed that its losses in 2018 and 2018 were not caused by the energy paradigm shift to wean the nation off nuclear power.

Minister of Trade, Industry and Energy Sung Yun-mo participates in a teleconference meeting with heads of 40 public entities, including President Kim Jong-kap of Korea Electric Power Corp., to discuss ways of taking steps to cope with the side effects of the spread of COVID-19 at KEPOCO’s Namseoul headquarters in Seoul on Feb. 25. (Photo: MOTIE)

The major cause of the losses, it said, was a surge in international fuel prices, which forced the power company to shoulder 3.6 trillion won more for fuel than the previous year, and 4 trillion won more to purchase electricity from the private sector.

The nuclear power utilization rate dropped in the year due to steps taken to ensure the safety of nuclear power units following the discovery of abnormalities with containment buildings, KEPCO said, not related with the government’s policy of weaning Korea off nuclear power.

The main reason for the KEPCO loss in 2019 was a 900 billion won drop in electricity sale revenues caused by a decline in electricity demand for cooling and heating, and a jump in greenhouse gas emission costs and depreciation.

KEPCO saw the nuclear power utilization rate rise 4.7 percentage points in 2019 compared to the previous year as planned preventive maintenance programs have been finished on a gradual basis.

In a related development, starting April 1, small businesses in the special disaster zone will have their electricity charges halved for six months between April and September.