Industrial electricity bills are higher than households… Reduce KEPCO’s deficit and ease the price shock

Deputy Minister of Industry “Electricity of large corporations
The cost recovery rate is less than 70%
Highlighting “concern about damage to industrial competitiveness”

The government has decided to raise electricity rates in areas that use a lot of electricity. The plan is to raise industrial electricity rates higher than for home and general (business use).

Park Il-joon, 2nd Vice Minister of Trade, Industry and Energy, met with reporters at the government complex in Sejong on the 21st and said, “I am thinking about adjusting the electricity rates for large capacity users. However, due to the recent increase in global energy prices, the rate of recovery of electricity costs for large companies is less than 70%. The government aims to recover the power cost recovery rate of high consumption sectors such as large enterprises to 98%.

The Ministry of Trade, Industry and Energy believes that applying a differential rate of increase in electricity rates to energy-consuming sectors such as large corporations can reduce KEPCO’s deficit and ease the public’s burden of raising electricity rates. The Ministry of Trade, Industry and Energy and the Ministry of Strategy and Finance are negotiating a differential scope and period of application. Deputy Minister Park said, “The rate of increase in electricity rates varies depending on how long the rate of change applicable to the electricity consumption sector is determined.

It is reported that KEPCO has already reported to the Ministry of Industry and Trade that it should raise electricity rates 50 won per kWh in the fourth quarter of this year. However, the Ministry of Strategy and Finance opposes a sudden increase in electricity rates on the grounds that the public is burdened with high prices. In addition to the increase of 4.9 won per kWh in the standard fuel cost, which was due to be raised from October during the last government, it is passive to rise further.

This is why the Ministry of Industry and Trade intends to apply the rate of increase in electricity rates differently. Energy-intensive sectors such as large corporations account for only 0.2% of the total number of units (contract units for the use of electricity such as factories and companies), but electricity consumption accounts for around 50% of total domestic consumption.

According to the monthly electricity statistics, KEPCO sold 26.12 million MWh of electricity for industrial use and 7.55 million MWh of electricity for residential use in July. The proportion of total electricity sales is 53.8% and 15.6%, respectively. Electricity sales came in at 3.39 trillion won for industrial use and 959.3 billion won for home use. On average, 127.1 per kWh was gained for home use and 129.8 per kWh for industrial use.

In this regard, Park Young-beom, emeritus professor of economics at Hansung University, said, “KEPCO’s deficit is due to the overlapping structural factors over the past few years along with this fluctuation in energy prices (surge). There are also concerns that trying to reduce the price burden could undermine industrial competitiveness. Looking at the level of electricity rates in Organization for Economic Co-operation and Development (OECD) member countries, Korea’s household electricity rate in 2020 was $103.9 per MWh, the fourth lowest after Mexico, Norway and Turkey. The industrial rate is $94.3 per MW, which is cheaper than the rate for home use, but higher than in major countries such as the United States ($66.6), Denmark ($77.1), Israel ($85.8), and Canada ($89.7).

Reporter Kim So-hyun alpha@hankyung.com

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