Electricity rate hike raises utility bills… “City gas, railroad, and tolls are demanded to increase”

[뉴스웍스=허운연 기자] With the increase in electricity rates as an opportunity, demand for major utility rate increases has been increasing. The possibility of an increase in city gas rates in November is rising, and the need for an increase in central public rates such as rail and highway tolls and local public charges such as public transportation is also being raised. This is a phenomenon that occurs as the price of raw materials such as oil has risen sharply and the accumulated losses to public institutions during the COVID-19 crisis are pushed to the limit.

According to the government authorities and 17 municipalities on the 26th, a movement to raise public rates such as city gas rates, railroad rates, highway tolls, and public transportation fees is being detected.

Within the government, discussions on city gas hikes are being considered first. An official from the Ministry of Trade, Industry and Energy said, “In November, the Ministry of Strategy and Finance had already delivered a request to increase city gas rates.

The city gas retail rate is linked to the wholesale rate of KOGAS, and the wholesale rate is determined by the raw material cost, which accounts for about 80% of the rate.

JKM, an indicator of LNG price in Northeast Asia, surged more than tenfold from $2.56 per 1 million BTU (calorie unit) at the end of July last year to $27.49 on the 24th of this month. During the same period, Dubai crude rose from $43.27 to $72.45 per barrel.

The government has been freezing for 15 months since the city gas rate for housing was cut by 11.2% and the general rate by 12.7% in July last year. Even though the raw material cost skyrocketed, they controlled the price increase due to the corona situation.

As a result, receivables for raw material costs of KOGAS increased rapidly. Accounts receivable are said to be worth 1 trillion won. The estimate of receivables as of the end of the year announced by KOGAS is 1.5 trillion won. As the recent surge in LNG prices in Northeast Asia has not been reflected, receivables are expected to greatly exceed our estimate.

The increased receivables lead to interest burden on KOGAS and are eventually reflected in gas rates.

The Ministry of Strategy and Finance is currently preventing a city gas rate increase in November due to the price burden. However, if the price increase is stopped in November, the amount of receivables of KOGAS can rapidly increase as it coincides with the winter heating demand, so the direction is being considered.

There is also the need to raise railroad fares. In the government’s mid-to-long-term financial management plan for public institutions in 2021-2025, the Korea Railroad Corporation stated that “the reality of railroad fares needs to be reviewed.”

After raising railroad rates by an average of 2.93% in 2011, the Korea Railroad Corporation has been freezing rates for 10 years. This means that demand for hikes is being pushed down that much.

The Korea Railroad Corporation, which was hit directly by the COVID-19 crisis, posted a loss of 1.34 trillion won last year and is expecting a loss of 1.17 trillion won this year as well. The debt-to-equity ratio is also expected to rise to 297.2% this year from 247.8% last year.

The Korea Railroad Corporation is also demanding the government to realize compensation for its public service obligation (PSO).

The PSO is a structure in which the government compensates a certain portion of the cost by discounting railroad fares to the elderly and students, or by maintaining a route with a deficit or a station with a deficit. According to the Korea Railroad Corporation, from 2005 to last year, the government received 5.1 trillion won in compensation, and the amount invested in it amounted to 6.7 trillion won.

The Korea Highway Corporation is in a position to suggest an increase in highway tolls to the government. The reasoning is that tolls have been stagnated at 4 trillion won per year due to the publicity enhancement policy of highways, while the reduction or exemption of tolls is increasing in order to solve the structural problem of increasing tolls. Expressway tolls have been frozen for six years since the 4.7% increase in 2015.

Public transportation rates such as buses, subways, and taxis, as well as local public charges such as water and sewage rates, are “waiting for an increase” one after another.

In the case of public transportation fares, factors of increase have accumulated in many cities and provinces. In Seoul, the basic fare based on transportation card is 1,250 won for subway and 1,200 won for city bus, which has been frozen for 6 years. In Daejeon, the city bus fare has been frozen at 1,250 won for the sixth year, but the loss subsidy to city market companies is expected to exceed 100 billion won this year, which is a big factor in the increase. Incheon and Ulsan have not increased the city bus fares since 2015 and Daegu since 2016.

Attempts that have not raised public transportation fares for a long time are under very strong pressure to raise prices due to inflation and a decrease in passengers, as well as an increase in oil prices.

Seoul, Incheon, Daegu, Daejeon, Ulsan, and Jeju actually reviewed plans to increase public transportation fares, but put them on hold as the Corona 19 situation did not improve.

As the pressure to raise increases, if the COVID-19 situation calms down, there is a possibility that a ‘domino raise’ will inevitably occur.

In addition, water and sewage rates and the price of volume-based garbage bags are expected to rise. Seoul and Gangneung have already raised their water and sewage rates since July, and Jeju decided to raise their water rates by an average of 5% and sewage rates by an average of 20% from January next year.

Incheon is pushing for an average 10% increase in sewerage rates over the next three years, and Sejong also plans to raise water and sewage rates in stages by 2025.

In the case of volume-based garbage bags, Incheon is pushing for price increases in nine counties and gu excluding Seo-gu, and Gangwon plans to raise the price based on 20 liters from 480 won to 560 won by 2023.