Progressive electricity rate under fire
By Lee Kyung-min
Korea Electric Power Corp. (KEPCO) is facing mounting calls to reform the current progressive electricity charge applied only to residential use.
The demand comes amid skyrocketing complaints from people who can ill-afford to turn on air-conditioners at home for fear of running up extremely high electricity bills in the scorching summer heat. Some are filing suits against KEPCO, demanding the state-run company drop the progressive electricity billing.
Under the current six-stage progressive electric charge system for residential use, it is 60.7 won per kilowatt-hours (kWh) until a household uses 100 kWh of electricity.
But between 100 and 200 kWh, the price goes up to 125.9 won, and between 200 and 300, 187.9 won. And if the amount of electricity goes over 500 kWh, the progressively increasing price reaches 709.5 won, 11.7 times that of the minimum rate.
The progressive rate is charged only to residents, although household consumption of electricity accounts for only 13.5 percent of the nation’s total electricity use. The rate is fixed for industrial and commercial use, which account for 57.1 percent and 19.9 percent, respectively.
With the frustration about the electric bills, more than 1,100 people have decided to sue KEPCO to demand it return their payment.
According to a law firm Inkang that represents them, those people are seeking an average of 650,000 won ($586) in compensation. They claim that KEPCO, by applying the progressive rate only to residential users, violated related company policy that stipulates that terms unfavorable to consumers are deemed unfair and thus invalid.
Since 2014, seven lawsuits have already been filed and are pending at district courts nationwide, but the courts have deferred delivering rulings, citing the complexity of the matter, according to the law firm.
The system was introduced in 1974 in an effort to reduce the electricity use by households following an energy resource shortage caused by the oil crisis, but the main structure has remained unchanged.
Experts say such an old regulation fails to reflect changed electricity consumption patterns.
“In the 1970s when the system was introduced, low-income brackets consumed far less electricity than high-income ones, so the system helped the former pay less. But nowadays the demand from low-income brackets has soared, so the progressive charge system gives a lot of financial burden to such brackets as well,” an official from Korea Energy Economics Institute said.
“According to a report by KEPCO Economy & Management Institute, the U.S., Japan and Canada have progressive charge systems but with only two to three stages, and the maximum rate is less than twice the minimum one. France and Germany do not have the progressive system at all,” he added.
The Ministry of Trade, Industry & Energy had said it was planning to reduce the rate, but recently withdrew the plan, saying KEPCO had accumulated 107 trillion won in debt.