The government said Tuesday that it would increase the average price of electricity by 5.4 percent to curb heavy electricity use that might lead to a blackout at peak seasons. It was the first rate hike since January.

The Ministry of Trade, Industry and Energy said that it approved the Korea Electric Power Corp.’s revised provision on electricity supply to increase the power rate by 5.4 percent from Thursday this week.

According to the revised system, the price of power will increase by 6.4 percent for industrial use, 5.8 percent for general use, 5.4 percent for night-time use, 3 percent for agricultural use and 2.7 percent for household use.

The electricity rates for educational use, meanwhile, were frozen at current levels.

Ministry officials said that various price factors should have pushed the average rate by 8 percent or higher, but that the rise was curbed to minimize the impact on consumers.

The MOTIE also refuted the claims by the industrial sector that electricity fees were too high.

“The fee for industrial electricity is still lower than the production cost,” said Han Jin-hyun, vice minister for trade and energy, in a joint press briefing with the Finance Ministry.

“Companies may minimize their economic burdens by choosing an adequate fee system which fits their electricity demand pattern.”

The ministry also decided to impose individual consumption tax on bituminous coal and reduce the tax rate for liquefied natural gas and kerosene, in a pledge to promote financial equity.

“Since bituminous coal became subject to taxation, the general production cost for electricity has risen by 2 to 3 percent,” Han said.

The government’s idea, according to the vice minister, is to induce an economically efficient consumption paradigm by introducing financial incentives and sanctions.

“We shall convert into an energy-efficient economic framework by attracting investment to the energy conservation market,” Han said.

“In the future, the electricity fee system will change to regulate peak-hour demand, with the help of advanced information communication technology.”

The ministry’s announcement, however, caused backlash from local industries, especially those that are heavily reliant on electricity.

“The industrial power fee hike, which was higher than expected, will cause a serious impact on the steelmaking industry,” said the Korean Iron & Steel Association in a statement.

The average price of electricity has risen 33 percent since August 2011, according to the association.

The Federation of Korean Industries also expressed concern that the new fee structure would negatively affect the nation’s petrochemical industry as well as related sectors such as automobile and shipbuilding.


By Bae Hyun-jung
(tellme@heraldcorp.com)