Electricity Price to Go Up to Summer Level
By Cho Jin-seo
Staff Reporter
The Ministry of Knowledge Economy said Sunday that it would raise the electricity price from December to March to the level of July to August in order to curb energy demand.
The ministry plans to finish the amendment on the pricing system before June, but the draft is expected to meet opposition from politicians and the media.
Currently, the electricity price is 15 to 25 percent lower in winter and in spring and fall, respectively, than in summer, since demand has previously peaked during hot summer days when people turn on air conditioners.
The power demand, however, hit a record high last week with the temperature dropping below minus 10 degrees Celsius, mainly because more and more offices and houses increasingly use electricity-powered heating systems.
"The current seasonal rate system was designed to cope with the high electricity demand during the summer months. But the demand for heating has seen electricity demands surge in the winter as well," a ministry official was quoted as saying by Yonhap news agency.
While the nation is the 15th largest in the world in terms of nominal gross national product, it is number 10 in electricity production. Furthermore, it is the fifth largest net importer of fossil fuels in the world, according to the International Energy Agency's 2009 report.
In addition to the high demand from heavy industries such as steel, car and shipbuilding, the increase of electric heating systems has greatly contributed to the recent supply crisis.
The ministry says that on Jan. 14, the national electricity demand hit the record high of 68.96 gigawatts, which was 9 percent higher than the 2009 summer peak-time record. The reserve supply was also reduced to a record low of 4 gigawatts.
The government has been trying to curb the electricity demand by staging various promotional campaigns such as wearing thermal underwear and lowering office temperatures. But experts say that the government's failed price policy has encouraged businesses and citizens to turn to electricity to stay warm.
Power generation is run by Korea Electric Power Corporation (KEPCO), which has a state monopoly. The company says its retail price has been raised only by 3.1 percent since 2006, while the average fuel and natural gas prices soared by 32.9 percent and 12.2 percent, respectively.
This discrepancy has led consumers to prefer electrical heating systems over kerosene and gas-based systems. Electric heaters are much less energy-efficient than ones, which directly burn fuels, because there is an additional loss of energy during the conversion from fuel to electricity and electricity to heat.
Another reason of this excessive dependency on electric heating was generous discounts for public, farming, industrial and overnight consumption, which is only a fraction of the "general" rate applied to office buildings. The ministry also wants to rebalance this discrepancy.
The average price of electricity for households in South Korea was about 78 percent of the U.S. price and about the same as Taiwan, the IEA 2009 report showed. KEPCO uses a progressive pricing system in addition to a number of complex base fees and discount schemes, so it is difficult to measure how the rate hike would affect individual households.