ELECTRICITY & GAS FEES TO BE RAISED

[Anchor Lead]

Electricity and gas fees are to be raised in Korea in July. The government says the raise is inevitable in line with the soaring international energy prices.

[Pkg]

The government has decided to raise electricity fees, a move it had been reviewing for some time. The rates will be increased in the third quarter from July. The adjusted unit fuel cost a key element of the electricity fees is to be raised by 5 won per kWh. So far, the adjusted unit fuel cost could only be increased by up to 3 won per quarter, but the government plans to modify the terms and conditions to allow for a 5 won increase. A household of four using 307 kWh of power a month will have to pay 1,535 won more. KEPCO says the raise is inevitable because of the soaring global fuel prices and the company's deteriorating financial situation. KEPCO recorded a record high deficit of 7.7 trillion won in the first quarter. Its annual deficit is predicted to reach 30 trillion ton. Gas prices will also be raised in July by 1.11 won per MJ. The average monthly gas fee for a household living in Seoul will go up by 2,220 won. The government cited rising global oil prices and natural gas spot prices, which largely determine the import price of natural gas. With electricity and gas rates rising, inflation will likely become even steeper. However, experts say keeping utility costs unchanged could have a negative impact on the economy.

[Soundbite] Lee Sang-yeol(Korea Energy Economics Institute) : "The longer the raise is postponed, the weaker the energy saving. That causes a vicious cycle of increasing energy demand and international energy imports."

From October, electricity fees will be raised by another 4.9 won per kWh. Gas prices will also be increased during the same month.