Reformed electricity rates only increase power consumption

By Hwang Ye-ji

Hwang Ye-ji

As December is here and the temperature has already dropped, high electricity bills are distressing people.

There were several blackouts last winter when people relied heavily on heaters. This winter seems not to be any better than the last. Electric heaters, electric stoves and electric mats are necessary winter items we use when the temperature drops to below zero. As a result, the colder the weather gets, the more electric appliances we use, the more our electricity bills increase.

Worries about high electricity bills began with progressive electricity billing for households. With this billing scheme, the unit cost of electricity increases as use increases. The billing system was introduced in 1973 in an attempt to reduce consumer spending. The United States, Japan and Canada have adopted progressive electricity billing for the households. Due to this system, many households started to get higher electricity bills which led to unfavorable public opinion against the billing system.

Last December, the government simplified the billing structure into 3 steps from 6 to alleviate the burden on households. Such an attempt is a global trend among the countries that use progressive electricity billing and Korea joined it. Under the system in Korea at level 1 the charge is 93.3 won per kilowatt for those using less than 200kWh, at level 2 the charge is 187.9 won per kWh for those using between 201 to 400 kWh, and at level 3 the charge per kWh is 280.6 won for those using over 400kWh.

However, it is questionable if the restructured billing system is enough to provide warmth through the winter for a majority of people. The average electricity used per household is 350 kWh, and households need to spend over 400 kWh to actually benefit from the new billing system. If average use is less than 200 kWh, a household might be charged more in comparison to to the former billing system. The new system does not drastically lower the charges and actually leads to more energy use because of the lower costs. The public is asking for closer scrutiny regarding the actual effects of the new billing system.

Furthermore, reorganization of the recent progressive electricity billing system has focused on household electricity consumption. No reorganization was carried out for general and industrial uses, which take the biggest piece of the pie of electrical consumption here. General and industrial electrical use have are on the progressive billing system for now, but are on a time-based differential rate scheme. The time-based differential rate scheme was formulated for high use at times of high electricity demands. For low electricity demand, the rate is determined at a lower cost. This leads to reduced consumption of electricity at peak times and increased demand at night time for the purpose of load leveling.

The reformed billing system also allows companies and stores advantages. There are factories run at night to make cost-effective production when the work can be done at night. Shops in urban areas open their doors in winter and run their heaters to attract customers, which is a huge waste of electricity. All of this is possible as these stores do not have to pay steep prices for electricity, not being subject to the progressive electricity billing system. The original intention of dispersing use of electricity only resulted in increased demand.

Including the side effects to increase total electricity consumption in comparison with household electricity rates, many other unfair practices take place. Korea Electric Power provides industrial electricity at much cheaper rates from 11pm to 9am the next day according to the differential electricity rate system. The prices are not even half in comparison with household electricity rates and are even cheaper than it cost for Korea Electric Power to purchase electricity from Power Generation Company. Therefore households pay higher rates than companies even though they use the same amount of electricity. Since the reformed policy only deals with household electricity, there are problems with the remaining electricity. For the same time zone, imagining people worrying about high electricity bills under progressive rates and choose to stay cold, some criticize the system, claiming it supports big companies, causing excessive consumption of electricity buy them.

The government expresses concerns over blackouts every summer and winter, but its actions concerning billing rates actually lead towards an increase in spending for electricity. The electricity billing system was reformed to relieve burdens on households in paying for electricity.

However, since it didn’t consider general and industrial electricity use, the reforms are not advantageous to households. Even the government says it doesn’t have plans to reform electrical use for industry, less industrial competitiveness gets worse. Reduction in consumer spending and redistribution of income, the original goals of instituting the new rates, basically becomes irrelevant with these outcomes. The public in response is now asking for the removal of progressive rates.

Hwang Ye-ji is a student majoring in Business School at Yonsei University. She can be reached at yeji―h@yonsei.ac.kr