Steps needed to curb possible inflationary pressure
The Korea Electric Power Corp. (KEPCO) said Thursday that it plans to raise electricity prices in the fourth quarter of this year. The price increase will be 3 won ($0.0025) per kilowatt hour for the three-month period from October, with the termination of the current discount of the same amount of money, the state-run firm said. This means an average four-member household will have to pay 1,050 won more every month, following the first increase in electricity charges in eight years since November 2013.
It is not desirable to raise the electricity rate as it is closely related to the people's daily lives especially at this time when they are struggling amid the persisting COVID-19 pandemic. Yet in many senses, the hike in utility rate is inevitable given the steady rise in the costs of resources such as crude oil, coal and liquefied natural gas (LNG).
Despite the spikes in international crude prices, in particular, during the previous quarters, the government has kept the electricity rate steady due to the lingering coronavirus pandemic. According to KEPCO, the prices of coal and LNG rose 17 won and 110 won per kilogram in the June to August period from the corresponding period last year.
The Moon Jae-in administration has also been pressured to increase the utility rate in order to abide by its pledge of moving toward carbon neutrality and a shift in its energy policies. It needs a huge amount of money to increase the portion of the more expensive recyclable energy resources. Since the onset of the Moon administration the utilization rate of coal, a low-cost energy resource for the production of electricity, has nosedived.
In contrast, the cost needed for the government to abide by its renewable portfolio standards (RPS) has continued to increase from 1.612 trillion won in 2017 to 2.247 trillion won last year. Global energy consulting company Wood Mackenzie predicted in June last year that Korea's electricity prices would rise by 24 percent in 2030 from 2020.
KEPCO registered more than 700 billion won in operating losses in the second quarter of this year. Worse still, the envisioned hike in the electricity rate will likely prompt hikes in various other public utilities and increase inflationary pressure. Due to the rise in input prices, it is highly feasible that the prices of manufactured goods, and farm, livestock and fisheries products, as well as services will go up simultaneously.
Consumer prices have already risen 2.6 percent in August from a year earlier, reaching the highest point this year. The prices of eggs and gasoline, for instance, have surged 55 percent and 20 percent, respectively. Furthermore, the government has provided disaster relief funds exceeding 11 trillion won and the local governments plan to offer their own financial assistance to pandemic-stricken people, further heightening the possibility of inflationary pressure.
The prospective commodity prices increases will deal a more severe blow to less privileged people. This is the reason why the government should pay closer heed to the possible impact the envisaged rise in electricity rates will have on the prices of people's daily necessities.
The Korea Electric Power Corp. (KEPCO) said Thursday that it plans to raise electricity prices in the fourth quarter of this year. The price increase will be 3 won ($0.0025) per kilowatt hour for the three-month period from October, with the termination of the current discount of the same amount of money, the state-run firm said. This means an average four-member household will have to pay 1,050 won more every month, following the first increase in electricity charges in eight years since November 2013.
It is not desirable to raise the electricity rate as it is closely related to the people's daily lives especially at this time when they are struggling amid the persisting COVID-19 pandemic. Yet in many senses, the hike in utility rate is inevitable given the steady rise in the costs of resources such as crude oil, coal and liquefied natural gas (LNG).
Despite the spikes in international crude prices, in particular, during the previous quarters, the government has kept the electricity rate steady due to the lingering coronavirus pandemic. According to KEPCO, the prices of coal and LNG rose 17 won and 110 won per kilogram in the June to August period from the corresponding period last year.
The Moon Jae-in administration has also been pressured to increase the utility rate in order to abide by its pledge of moving toward carbon neutrality and a shift in its energy policies. It needs a huge amount of money to increase the portion of the more expensive recyclable energy resources. Since the onset of the Moon administration the utilization rate of coal, a low-cost energy resource for the production of electricity, has nosedived.
In contrast, the cost needed for the government to abide by its renewable portfolio standards (RPS) has continued to increase from 1.612 trillion won in 2017 to 2.247 trillion won last year. Global energy consulting company Wood Mackenzie predicted in June last year that Korea's electricity prices would rise by 24 percent in 2030 from 2020.
KEPCO registered more than 700 billion won in operating losses in the second quarter of this year. Worse still, the envisioned hike in the electricity rate will likely prompt hikes in various other public utilities and increase inflationary pressure. Due to the rise in input prices, it is highly feasible that the prices of manufactured goods, and farm, livestock and fisheries products, as well as services will go up simultaneously.
Consumer prices have already risen 2.6 percent in August from a year earlier, reaching the highest point this year. The prices of eggs and gasoline, for instance, have surged 55 percent and 20 percent, respectively. Furthermore, the government has provided disaster relief funds exceeding 11 trillion won and the local governments plan to offer their own financial assistance to pandemic-stricken people, further heightening the possibility of inflationary pressure.
The prospective commodity prices increases will deal a more severe blow to less privileged people. This is the reason why the government should pay closer heed to the possible impact the envisaged rise in electricity rates will have on the prices of people's daily necessities.
