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Park may face dilemma in utility fee hike
Employees of Korea Power Exchange monitor the realtime electricity demand and supply in this file photo taken on Sept. 16, 2011. / Korea Times file
By Kim Se-jeong
Park Geun-hye
By Kim Se-jeong
The Seoul Metropolitan Rapid Transit Corporation (SMRT), a public enterprise owned by the Seoul metropolitan government, has a grim outlook for the new year.
Its books are likely to go from bad to worse due to rising electricity bills.
Korea Electric Power Corporation (KEPCO), responsible for 93 percent of Korea’s electricity generation, supplies electricity to SMRT. In a recent agreement, SMRT and seven other subway operators throughout the country gave consent to a price rate increase, which will eventually cost SMRT an additional 15.3 billion annually.
There were increases of 6.3 percent in August last year, 6.6 percent in December last year, and 6 percent in August this year.
The subway operators argue KEPCO’s decision was inconsiderate given that they are already struggling.
“We’re between a rock and a hard place,” an official at SMRT told The Korea Times on Monday.
KEPCO argues the decision was necessary to motivate consumers to save electricity and to enable a stable electricity supply.
The row between the power supplier and the subway operators illustrates a dilemma for the incoming government under Park Geun-hye as president.
Arguably, Korea is short on electricity. On Sept. 15 last year parts the country endured a blackout. The power company took the decision to cut electricity in a rolling blackout as demand hit 67.26 million kilowatts with an available supply of just 67.52 million kilowatts due to unseasonal hot weather. The power company remains concerned about the possibility of future outages.
Two nuclear reactors that are past their expiration date are still running, their operation dates extended to fill the power generation gap.
Very few disagree that “unrealistically” cheap electricity is a problem, and the government plays a role in keeping the price low.
According to KEPCO, electricity is charged at a progressive level — starting at 57.90 won per hour for the first 100 kilowatts for an ordinary house and rising gradually to 677.30 won for over 500 kilowatts
This is half the price of electricity in the United States and 40 percent of the price of Japan.
The incrasing price petroleum worldwide drives the needs for price hike domestically.
Sonn Yang-hoon, a professor at Incheon University, said, however, the government doesn’t want to risk losing public support by raising the price of electricity.
Energy experts explain the price hike will be the ultimate solution in putting a cap on rising electricity consumption.
Among industrialized countries, experts say Korea is one of the few whose electricity consumption continues to grow while use remains at a stable level in the other nations. Most OECD countries are also moving quicker toward renewable energy technology.
Electricity pricing is art of politics
Will Park make energy an issue and change the pricing system to make it more realistic? Probably not, according to those who watch energy and politics.
As a presidential candidate, Park acknowledged the need for a thorough review of the pricing procedure. Her advisors on energy policies in her election camp said, if elected, Park would review the system.
In Korea, electricity pricing is a highly political decision — more so than other countries because of the monopoly in the market.
The decision lies in the hands of KEPCO, the only electricity distributor in Korea, and the Ministry of Strategy and Finance, which owns 51 percent of KEPCO’s stock.
KEPCO’s history goes back to the Seoul Electric Company, or Hanseong Jeongi Company, established in 1898 towards the end of the Joseon Kingdom. Under Japanese occupation, several electric companies merged into the Korean Electricity Company, which later became the Korea Electric Company. By 1982, the Korea Electric Company was completely owned by the Korean government, which renamed it KEPCO.
For the rate increase, KEPCO needs approval from the strategy and finance minister, who is usually the president’s pick.
Cho Sung-bong, a professor at Soongsil University in Seoul, said establishing an institute that would oversees the pricing procedure independently would diminish political influence.
He explained another political aspect of electricity pricing.
“Look carefully! Electricity bills will go up by large amounts in January and February. The period between the presidential election and inauguration is in general the golden time for increases because no one can really regulate. The outgoing president in a lame duck and can’t control it. The incoming administration won’t be willing to take responsibility for increases that happen during the transitional period.”
Subway operators demand
subsidy from central gov’t
The Seoul Metropolitan Rapid Transit Corporation (SMRT) and other metropolitan subway operators are facing financial difficulties due to the government regulations.
What they demand is a subsidy from the central government that would cover losses in giving free rides to those over 65.
“We make huge losses from the elderly who get free travel. We want the central government to help us in balancing that out,” an anonymous official from the SMRT told the Korea Times.
Only KORAIL and a private operator of the New Bundang-line receive subsidy.
According to SMRT, free travel by senior citizens accounted for almost 20 percent of passengers, costing it 140 billion won last year.
When first introduced, over-65s traveled on the subway at half price but from 1984 it became free.
As Korea’s elderly population increases, the subway operators complain more.
Yet the government is reluctant to take action that will most likely prove unpopular. It will be hard for Park Geun-hye, whose victory in the Dec. 19 presidential election was largely attributed to the older age group.