Korea Electric Power Corp. (KEPCO) has postponed its planned announcement on an electricity rate hike for the second quarter of this year. The state-run utility said the energy ministry had asked it to shelve the announcement until after a consensus is reached among relevant ministries.
However, it's not difficult to figure out the real reason behind KEPCO's decision. During his campaign in January, President-elect Yoon Suk-yeol pledged to freeze the power bills for consumers. So, the energy ministry and KEPCO are certainly conscious of Yoon's transition committee, which is highly mindful of surging living costs amid the coronavirus pandemic. But it's quite worrisome that setting electricity rates is at the mercy of political considerations.
KEPCO has had to raise electricity rates in keeping up with surging global oil and gas prices. Yet the Moon Jae-in administration reined in the hike, apparently aware of the presidential election and other political events. The result was the power company's 5.86 trillion won ($4.8 billion) operating loss last year. In December, KEPCO announced a plan to raise electricity rates by 6.9 won per kilowatt-hour in April.
A rapid increase in utility bills will weigh heavily on low-income households and small businesses and stimulate inflation. But it's not advisable to postpone the rate hike indefinitely. Prices of raw materials are spiking following Russia's invasion of Ukraine and the West's sanctions. KEPCO has no choice but to raise the rates although it is not possible in April.
The incumbent government's inaction on electricity bills will certainly result in a greater burden for the incoming administration. Unless electricity rates are raised as planned, KEPCO's operating loss will amount to 20 trillion won this year. The overconsumption of electricity is dire indeed as electricity rates have been kept at low levels. But taxpayer money should be used to make up for KEPCO's losses, meaning that the public must bear the brunt of it. To reduce power waste, it's imperative to raise electricity rates to proper levels.