Electricity rate hike
KEPCO should unveil management revamping plan
Electricity rates will rise 4.9 percent on average from today amid a scorching heat wave in most parts of the country.
The price hike comes after the Korea Electric Power Corp.’s (KEPCO) two previous proposals were rejected by the government that fears a sharp rate increase will build up inflationary pressures at a time when the economy is mired in a long slump.
The increase for households is 3.9 percent and that for industries, 6 percent, according to the Ministry of Knowledge Economy. Rates for agricultural use, which have stayed unchanged for 11 years, will go up 3 percent. The ministry says households that use about 300 kilowatts a month will pay 1,200 won more, while industries that use 59,000 kilowatts a month will pay another 327,000 won.
The utility firm said the rate increase was inevitable to improve its worsening balance sheet and help reduce power consumption, adding that electricity bills will have to be readjusted upward once again by the end of the year.
The 4.9 percent increase is expected to trigger the building of a nuclear power plant with the production capacity of 1 million megawatts, considering that higher utility bills will discourage businesses and households from consuming electricity.
KEPCO is right to say the country’s electricity rates fall short of even production costs; the state monopoly posted revenue from electricity sales of 23 trillion won in the first half of this year while it paid power generation companies 25 trillion won during the first six months.
Its cumulative losses since 2008 have reached 11 trillion won and its first-half operating loss was estimated at about 2.9 trillion won. The latest rate hike would enable the company to cut its operating loss for this year to 2 trillion won. Its ``unhealthy’’ balance sheet has caused KEPCO to be unfit for international bidding in many cases.
True, the country’s electricity rates are cheap. Korea’s per capita power consumption is 1.7 times bigger than the Organization for Economic Cooperation and Development average and ranks 10th among its 34 member nations. Its electricity rates remain at 40 percent of Japan’s and 70 percent of America’s.
The result is a waste of power and it has been an annual ritual for policymakers to alert people over possible power blackouts in summer and winter.
Most worrisome is that the government has been taking a political approach toward the energy issue out of fear that rate rises will affect public sentiment negatively. In fact, KEPCO is reportedly pushing for the year’s second rate rise after the Dec. 19 presidential election.
What is needed now is for the government, in consideration of the country’s virtual lack of viable energy resources, to be more proactive in raising electricity bills to such a point where consumers feel greater pressure to refrain from wasteful power consumption.
Needless to say, KEPCO will have to suggest a management rationalization plan given public accusations that the state company is trying to shift the deficit onto the people and businesses and not doing what it should, such as belt-tightening.
The nation might be in need of a long-term grand blueprint for the electric power sector, which could include reviving the stalled privatization plan. At least the introduction of competitive systems must be considered to nurse the staggering sector back to health.