Electricity Rates Raised 4.9% as of Aug. 1

Rate hikes minimized in consideration of possible adverse impact on general price hikes and rising burden to low-income people

The government raised electricity charges by an average of 4.9 percent starting Aug. 1 as part of efforts to make up for rising electricity products costs.
The Ministry of Knowledge Economy (MKE) said on July 26 that current electricity bills covered 86.1 percent of production costs, but decided to minimize electricity rate hikes in consideration of their possible adverse impact on general price hikes and the rising burden to low-income people.
The MKE said it decided to raise electricity rates for low-income people at lower rates than those for large-sized companies and high-rise buildings ― less than 2 percent for household consumption, 4.1 percent for commercial use and 6.1 percent for industrial use. The move is designed to alleviate the burden to those in the low-income bracket caused by electricity rate hikes. The ministry said it set electricity rate hikes for household consumption at less than 2 percent, half of the 2011 general price hike forecasts.
The ministry said that it is inevitable that electricity rates will rise in order to reflect rising energy production costs caused by high raw materials prices, despite concerns that electricity rate hikes could further stoke the nation's already high inflation.
Power companies have demanded the rate hikes, citing rising crude oil costs which have been weighing on them, causing their losses to balloon, but the government has put off price hikes as it comes to grips with rising consumer prices.
The electricity rate increase is still expected to exert upward pressure on consumer prices. The ministry forecast that the electricity rate increase will raise consumer prices by 0.038 percentage points annually and production prices by 0.122 percentage points.
Korea's consumer prices jumped 4.4 percent in June from a year earlier, exceeding the government's annual target of 4 percent for the sixth straight month. Producer prices also increased for the 19th straight month in June.
The MKE predicted that the electricity rate hike will help reduce electricity consumption by 5.1 billion kilowatt-hours annually, accounting for 1.1 percent of the total electricity use in Korea.
In an effort to reduce energy consumption, the ministry said that it will strengthen the nation's energy efficiency standards on key home appliances such as refrigerators and washing machines.
It also plans to introduce a differentiated rate system in which consumers pay more for electricity use during peak demand hours. nw

Minister of Knowledge Economy Choi Joong-kyung announces a raise in electricity rates as part of efforts to make up for rising electricity production costs at a news conference at his ministry on July 26.

Photo on Courtesy of MKE