Gas rate rise: the anticipated heating cost crisis…why was the government’s response late?

The topic of the last Lunar New Year family meeting was ‘heating cost bomb’ in winter. A few days before the holidays, people who received their gas bills for December were shocked by the bill, which increased by about 1.5 times compared to previous years.

Vulnerable people living in poorly insulated houses were hit even harder. While the ‘strongest cold wave’ hits the Korean Peninsula this winter, the burden on the vulnerable class is expected to continue for the rest of the winter, considering that the cost of fuel for the lower income class usually increases in the first quarter.

The reason for the increase in gas prices is the ‘global energy crisis’ caused by the war in Ukraine which started at the end of February last year. However, it is assessed that European countries, which have reduced energy consumption by ‘tightening their belts’ early on, are going through the global energy crisis relatively smoothly despite Russia’s reduction in gas supply.

Recently, as the raw material cost of natural gas has fallen due to international oil prices and exchange rate cuts, industrial city gas wholesale rates have been cut in Korea since January. However, Yoon Seok-yeol’s government is in a position that further increases in household gas rates are inevitable in the future.

The heating costs crisis has already been predicted several times since last year.

Korea Gas Corporation (KOGAS) raised the residential gas rate per 1 MJ from Seoul by 5.47 won from 14.22 won to 19.69 won four times last year, raising it by 38.5%. From now on, there were concerns that the common people and the vulnerable would be hit, but no additional measures were suggested.

In addition, as the ‘strongest cold wave’ hit this winter, the demand for heat from all households increased, which also contributes to the burden of gas rate rises.

City gas rates and heating rates rose by 38.4% and 37.8%, respectively, over the past year, but the actual increase was more than 50% (1.5 times) as the use of city gas for housing increased due to the cold weather this year.

According to the Ministry of Trade, Industry and Energy, the consumption of city gas for residential use last month was 85.55 million GJ (gigajoules), an increase of 11.5% compared to 76.73 million GJ in December 2021.

Regarding this, Vice Minister of Trade, Industry and Energy Park Il-joon said in a press conference held at the Sejong Government Complex on the 26th, “Gas consumption in December last year increased by 11-12% from ‘to compare with a year ago. “more,” he said.

Deputy Minister Park added, “We judged that the cost burden would increase to some extent, but the demand for heating increased due to a cold wave that exceeded expectations.”

At the press conference, the Ministry of Trade, Industry and Energy emphasized its plan to increase the amount of energy voucher support for the vulnerable and to expand city gas rate reductions for vulnerable people.

According to the newly announced plan, the Ministry of Industry doubled the amount of winter energy voucher support from 152,000 won to 304,000 won for about 1.18 million households, including the elderly, the disabled, single-parent families, and families children among households receiving national basic. livelihood. raise.

From December last year to March this year, the Ministry of Trade, Industry and Energy also reduced the gas fee discount to about 1.6 million households, including people with disabilities (levels 1 to 3), national and independent meritorious people, and recipients basic living. such as living and medical benefits, from the current 9,000 won to 30,000 won, Doubled from 6,000 to 18,000 to 72,000.

However, some note that the amount of support is still insufficient despite these additional measures.

The 304,000 energy voucher earned is to be used over a period of approximately 7 months, from October 12 last year to April 30 this year, so on a monthly average, approximately 47,000 earned will be supported. If a maximum of 72,000 won is applied to the gas rate discount applied from December last year to March this year, the maximum that can be supported during the winter season is about 119,000 won per month.

However, according to the National Statistics Portal of the Office for National Statistics, in the first quarter of last year, ‘1st quintile households’, which are the lowest 20% of income, spent an average of 100,288 won per month on fuel costs such as electricity. and city gas. In addition, if we assume that the gas price will rise approximately 1.5 times as the government estimates, taking into account the 40% increase in wholesale gas prices last year and the increase in demand for heat due to the recent cold wave, the more vulnerable people who spend a lot on heating costs, the more likely they are to lack subsidies.

In response to public opinion that the government’s measures are not sufficient for raising heating costs, it is known that the people’s power of the ruling party and the government are considering ways to expand the support of heating costs not only to’ those who are vulnerable, but also to the common people and the middle class.

People’s Power Ho-young Joo said at a hospital countermeasure meeting held at the National Assembly on the 31st, “President Seok-yeol Yoon ordered to devise support measures for the middle class in connection with the sudden increase in heating costs .” , It seems that the government is a little ready, so I try to postpone it. “

The accumulation of receivables of Korea Gas Corporation is also the background to Korea’s ‘heating cost bomb’ situation due to the increase in household gas rates.

Until the end of last year, Korea Gas Corporation’s receivables amounted to about 9 trillion won. It is known that KOGAS recently reported to the National Assembly that a gas rate increase of 39 won per 1MJ should be maintained from the second quarter in order to recover all receivables within this year.

An increase of 39 won from the current 19.69 won per 1MJ residential gas retail rate in Seoul is about three times higher to 58.69 won.

As the government freezes gas rates for the first quarter first to ease shocks to the common people caused by rising gas rates, KOGAS expects to accumulate about 5 trillion won in receivables in the first quarter, including the impact the cold wave.

The government and KOGAS are still supplying gas at a price below the cost of natural gas, so a rate hike is inevitable to prevent the accumulation of additional receivables. The government intends to decide whether to raise gas rates in the second quarter or not through discussions with related ministries towards the end of March, but experts generally believe that the increase will be made to solve the problem of accumulated receivables of KOGAS .

Accounts receivable from KOGAS started to rise in particular as the price of liquefied natural gas (LNG) soared after the war in Ukraine last year. Accounts receivable, which was 1.8 trillion won in 2021, was more than 4.5 trillion won in the first quarter of last year and 5 trillion won in the second quarter of last year, and increased to about 9 trillion won at the end of last year.

Along with this, KOGAS’ debt ratio also increased from 453% in 2021 to 664% in the third quarter of last year.

On the other hand, Yoon Seok-yeol’s government and the ruling party criticized that the political decision of the former Moon Jae-in administration to stop the increase in residential gas rates has led to a heating cost bomb situation.

On the other hand, the opposition parties criticized the government for raising residential gas rates while lowering industrial gas rates, saying it was inconsistent and “leaves the burden on the common people.”

Seoul’s standard residential gas rate was held at 14.22 won per 1 MJ from the first quarter of 2021 to the first quarter of 2022, and was raised four times in April, May, July, and October 2022, and is currently 19.69 to gain per 1 MJ.

According to the Ministry of Trade, Industry and Energy, as of last month, the wholesale rate for residential city gas was 18.3951 won per 1MJ, and the wholesale rate for industrial city gas used by manufacturers for factory operation was 33.2550 per 1MJ.