Can long johns fight energy concerns?

By Kim Tae-gyu

Long johns have emerged as new ammunition in the government’s uphill battle against fast-rising energy consumption, which is feared to cause blackouts this winter.

Minister of Knowledge Economy Hong Suk-woo on Wednesday staged an event to purchase long underwear to demonstrate his strong will to conserve electricity.

This came on the heels of a similar maneuver by Korea Electric Power Corp. (KEPCO) President Kim Joong-kyum, who held a media session recently to show he was sporting long johns.

Their ideas are understandable. They want to implant a sense of urgency in people’s minds at a time when electricity supply is likely to struggle to meet demand during the cold spell.

Such concerns were increased this year after the country suffered from unprecedented rolling blackouts in September amid an unexpected heat wave.

Economically speaking, what Hong and Kim are now attempting to do is to shift the demand curve to the left or encourage people to conserve energy at a given price.

However, there exists a far easier way to affect end users and that is by raising electricity prices.

Currently, the country’s electricity charges cover less than 90 percent of the costs although KEPCO raised them twice this year.

In particular, the bills for farmers cover less than 35 percent of expenses as the government has failed to raise their bills for the past 11 years in the face of strong opposition from various farmers’ associations.

As a result, KEPCO saw its bottom line deteriorate by around 700 billion won last year alone due to the ultra low electricity charges for farmers.

The rule of thumb in economics is that people respond to incentives. When energy rates are high, they tend to save on power and vice versa.

It is high time for the Seoul administration to crank up energy prices so that people, including farmers, respond to incentives. Otherwise, they will keep using energy like water.

It should remember that the peak demand for energy surged by 12 million kilowatts in the winter season for the past two years, up to 17 percent of the country’s daily capacity, and the figure is likely to jump by another 4 million kilowatts this winter.

Do you know why? It’s because electricity bills are dirt cheap.

This reporter is certain there are not enough reasons to wear long underwear. Instead, I strongly recommend that the Ministry of Knowledge Economy raise the price of energy so that consumers will save as much as they can.

They might worry about the high-rising inflation rate. But the government has to put the conserving of energy higher than inflation on the priority list.

Otherwise, blackouts will again hit the country, which will be much worse than inflation.