Electricity, gas rates to be raised to cap soaring losses

The Korea Times

The Korea Times

Business

Sat, September 23, 2023 | 12:12

Companies

Electricity, gas rates to be raised to cap soaring losses

Posted : 2023-05-15 16:10

Updated : 2023-05-15 19:43

Minister of Trade, Industry and Energy Industry Lee Chang-yang speaks during a press briefing at the Seoul Government Complex in Gwanghwamun, Monday. Yonhap

Low-income families exempt from hike for 1 year

By Lee Kyung-min

A four-person household will shoulder an additional 7,400 won ($5.52) increase on average in their combined monthly gas and electricity bills from June following an 8 won per kilowatt hour (kWh) hike in power rates and a 1.04 won per megajoule (MJ) rise in gas bills, the government said Monday.

The new electricity and gas rates will come into effect from May 16.

Under the new price scheme, the Ministry of Trade, Industry and Energy said the monthly electricity bill for a four-person household that uses 332 kWh of electricity on average will be raised to 66,590 won from 63,570 won.

The monthly gas fee will increase by 4,400 won, provided that a household uses 3,861MJ every 30 days.

Monday's decision is aimed at reducing snowballing losses at two state-run utilities ― Korea Electric Power Corp. (KEPCO) and Korea Gas Corp. (KOGAS). The combined operating losses of KEPCO and KOGAS since 2021 stood at 50 trillion won as of March.

But the rate hikes are a major source of frustration for taxpayers.

The per kWh rate rose 13.1 won in the first three months of this year, in addition to a combined 19.3 won hike in 2022. Gas rates were raised by 5.47 won per MJ last year.

The implementation of the hike, however, will be postponed for one year for socially vulnerable groups of people earning less than 50 percent of the country's median income.

Will utility fee hikes affect inflation cooldown?

2023-05-15 16:41 | Economy

Additional rate hikes are not in store for the remainder of the year for now, the government added, while decisions will factor in global energy price fluctuations and the financial conditions of state-run energy firms in the quarter to come.

A utility bill encompassing electricity, gas and water sticks out of a mail box at an apartment building in Seoul. Yonhap

The increases fall far short of numbers the ministry said last year were needed to recover losses at the two state-run utilities.

In a written opinion submitted to the National Assembly, the ministry said electricity and gas rates should be raised by 51.6 won per kWh and 10.4 won per MJ.

Minister of Trade, Industry and Energy Lee Chang-yang said Korea will not be able to see a meaningful drop in electricity and gas prices for at least two quarters, even if the sustained high global energy prices come down.

"A minimum time lag of six months is needed for a decline in global energy prices to be fully reflected in the country's energy import prices," he said during a press briefing at the Seoul Government Complex in Gwanghwamun, Monday.

"Whether and by how much the two state-run entities would be able to fortify their financials in the meantime will be among the key factors in adjusting electricity and gas rates."

KEPCO and KOGAS said last week that they will sell off non-core assets and discuss implementing a wage freeze on senior-level employees this year.

According to the utilities, the measures will help KEPCO and KOGAS each secure 25.7 trillion won and 15.4 trillion, respectively, to improve their financial soundness.

The Korea Chamber of Commerce and Industry (KCCI) said the electricity and gas rate increases are necessary, but?remained wary about further hikes.

"Monday's decision was inevitable,?given snowballing?operating losses at?KEPCO and?KOGAS. But further hikes must take into account the?economic slowdown and export slump," it said.??

lkm@koreatimes.co.kr