Electricity, gas rates to rise in August

By Kim Tong-hyung

Staff reporter

Korean consumers are facing a significant rise in their monthly electricity and gas bills following the government’s approval of proposed changes on Friday.

According to the announcement by the Knowledge Economy and Finance Ministries, the country’s electricity rates will be raised by an average of 3.5 percent starting in August and gas prices will be upped by 4.9 percent.

A 4.3 percent price hike was set for intercity bus fares and 5.3 percent for express buses, although the government decided against raising rail fares, toll charges, postal service fees and water bills.

The rise in public service fees comes at a time when consumers in many cities are already feeling the pinch of inflated bills for transportation, water and other services, as municipal governments apparently find it easier to raise such prices with the local elections now over.

Government officials claimed that the price hikes, especially in electricity and gas, were inevitable to better reflect higher production and import costs.

The freezing of such bills have Korea Electric Power Corp. (KEPCO) and Korea Gas Corp. (KOGAS) toiling under debt. KEPCO’s debt now nears 869.9 billion won, while KOGAS said in June that its gas receivables have bloated to 4.3 trillion won due to the sharp increase in natural gas prices. According to the Finance Ministry, the increase in gas prices will allow KOGAS to shed its losses by 700 to 800 billion won annually.

The cheap electricity prices have also been stretching the country’s ability to provide enough power. The country’s records for summertime electricity consumption were renewed seven times just this month.

According to the government’s estimates, the raised prices will have the average household pay 590 won more a month for electricity and 2,800 won more for gas.

“Before the adjustments, the average consumer price of electricity was 91.5 percent of the production cost, while it was 88.9 percent for gas,” said Yoon Jong-won, an official from the ministry’s economic policy bureau. The raised public service prices are expected to lift overall consumer prices by 0.2 to 0.3 percent, Yoon said.

“This doesn’t change our forecasts for a 2.9 percent increase in consumer prices this year, as the raise in public service prices was already considered in our calculation,” he said.

The Knowledge Economy Ministry said that the price hikes were designed to minimize their effect on households. Although the electricity prices for industrial usage will be raised by 5.8 percent, the household bills will rise by only 2 percent. Even after the price adjustments, the country’s electricity and gas prices remain more than 10 percent lower than their actual market value, ministry officials said.