Decision on electricity rate for Q2 expected this month

Representatives of the ruling People Power Party attend a meeting to discuss energy price increases at the National Assembly in Yeouido, Seoul, April 6. Korea Times photo by Ko Young-kwon

By Lee Kyung-min

The government and the ruling People Power Party (PPP) are in the final stages of talks to set the electricity rate for the second quarter of this year. An announcement is expected to be made before June, according to market watchers, Friday.

At issue is how much electricity fees should be allowed to rise, which is a politically sensitive step that could sour public support for the government, already waning due to surging costs of living over the past few years.

Market watchers say the increase will be no more than 10 won ($0.01) per kilowatt hour (kWh), since a rate hike of 13.1 won per kWh for the first three months of this year remains a major source of public frustration, coupled with a spike in gas prices last winter.

The electricity fee hike will help fortify the finances of debt-laden Korea Electric Power Corp. (KEPCO). The state-run energy firm suffered an operating loss of 32.6 trillion won last year. The deficit in the first three months of this year is estimated to exceed 5 trillion won, according to market consensus. KEPCO is paying daily interest of 4 billion won for corporate bonds issued to offset the shortfall in operating funds. Every increase of 1 won per kWh will translate into a sales increase of 500 billion won.

An increase of 7 won per kWh, for example, will lead to about 2,000 won rise in the electricity bill for a four-person household every month. A maximum 5,000 won increase in the monthly electricity bill will follow if the rate is raised by 13 won, which is how much it was raised a quarter earlier.

Data from Korea Energy Economics Institute (KEEI) showed that a one-person household spent 230 kWh in June 2020, followed by 289 kWh for a family of two, 298 kWh for three and 307kWh for a four-person household.

Their monthly electricity bill came to 32,800 won, 44,880 won, 46,730 won and 48,570 won, respectively.

But the monthly bill will soar at a far higher rate for those who use more electricity due to the progressive rate calculation method. The method charges a higher per-kWh rate for households with higher consumption.