KEPCO PROPOSES RAISE IN ELECTRICITY PRICES

[Anchor Lead]

In a report to the National Assembly, the Korea Electric Power Corporation has stressed the need to raise monthly electricity prices by as much as 80,000 won to ease its deficit. This indicates the desperation the power company is experiencing, as it is predicted to post a largest-ever deficit this year. The government is discussing a raise with KEPCO, which will not be as much as the company proposes, though.

[Pkg]

In a report to the National Assembly, based on a securities firm's analysis that it will likely post a record deficit of 35 trillion won this year, KEPCO said it must raise power rates by 261 won per kilowatt-hour in order to clear all of its deficit. This means starting next month, KEPCO should raise 80,000 won monthly for four-member families that use an average amount of electricity. However, it can actually increase as much as 4.9 won per kilowatt-hour. In a meeting with reporters, the Second Vice Minister for Industry and Energy acknowledged the need to raise more than that. However, Park Il-jun also mentioned there's a differing view from that of the finance ministry and the exact level has not been finalized. This echoes the stance stressed by the industry minister last week that the government will reflect the spiking costs of energy production on power rates.

[Soundbite] Lee Chang-yang(Minister of Trade, Industry and Energy(Sept. 16)) : "The gov’t will lay the foundation for stable energy supply by raising power rates gradually. We will establish the principle of cost valuation for calculating energy prices to restore the function of price signals and promote the optimal balance between demand and supply."

The vice minister also said the government and KEPCO are discussing measures to make a temporary rate hike for big power consumers like major conglomerates. The government also plans to revise the system allowing large corporations to use cheaper electricity reserved for farming. The government is also likely to raise gas rates by more than its original plan of 0.4 won per megajoule. Higher power and gas rates are fueling inflation. Last month, electricity and gas prices were already raised by 18.2 percent and 18.4 percent on-year, respectively. With the rate hikes predicted ahead of winter, some are calling for measures to buffer the marginalized from the possible impacts of the spikes.