KEPCO victimized by relaxed progressive electric billing

By Kwak Yeon-soo

KEPCO CEO Kim Jong-kap

Korea Electric Power Corp. (KEPCO) is expected to take a hit from the Moon Jae-in administration's move to relax the progressive electric billing system to lower utility bills for households ahead of the summer, according to industry analysts Tuesday.

The government plans to ease the current electric billing system, which charges households and businesses substantially more when their electricity consumption exceeds certain levels, so that users will pay less than in the past even if they consume power extensively to run their air-conditioning.

In the summer of 2018, many households, who turned on their air-conditioners to cope with the record heat wave, were angry with the government over higher utility bills. This time policymakers have decided to take preemptive steps to lower utility bills as the upcoming summer season will also be one of the hottest in history.

However, the government has not set aside any budget to financially support KEPCO, which will lose up to 300 billion won ($270 million) in revenue this year, due to changes to the progressive electric billing, the analysts said.

On Monday, the joint task force team, consisting of industry experts, scholars and government officials, held a panel discussion to suggest three proposals, all of which point to lowering utility charges for households during the summer.

The three suggestions include scrapping the progressive billing system; or raising the electricity use ceilings of the first two stages; or cutting the current three stages to two.

Currently, the electric billing system is divided into three stages, in which the heaviest users are billed at a rate three times greater than the lowest users.

This has prompted criticisms, with those citing that the billing rates are too high for the heavy users and the households are hardly able to use their air-conditioners due to extremely high electricity bills.

Park Jong-bae, a professor at Konkuk University and head of the task force, speaks during a panel discussion on suggesting proposals to ease the electric billing system at Korea Press Center in Seoul, Monday. Yonhap

The country's state-run utility company is in a quandary as it has already been suffering from worsening profitability as prices of coal, natural gas and other raw materials have risen sharply in recent years.

“As a state-run corp., we understand that KEPCO has to fulfill its social responsibility. However, we are also responsible for protecting shareholders' interests,” a KEPCO official said.

Shareholders have opposed amendments relating to easing the electric billing system, fearing that KEPCO may be burdened with more debt.

KEPCO logged 630 billion won ($533 million) in operating losses in the first quarter of this year and it has been seeing continued operating losses in the second quarter.

KEPCO closed at 26,000 won Tuesday, down 2.44 percent from Monday.

Over the state-run power distributor's faltering profitability, its shareholders have staged a number of protests.

“As oil prices continue to fluctuate and prices of raw materials are higher than expected, the financial situation is expected to be worse in the second quarter than the first quarter,” the official said.

The official said KEPCO will continue its talks with the government to split the financial burden for each of the three proposals and choose the most preferable billing system.

The Ministry of Trade, Industry and Energy said its task force team would recommend amendments in the billing system to KEPCO after the public hearing scheduled for June 11, and the government will finalize the new electric billing system by the end of this month.