[News Today] INDUSTRIAL POWER RATE HIKE

[LEAD]
Starting today, industrial electricity rates will rise by an average of 9.7%. This is the first increase in nearly 11 months. Korea Electric Power Corporation said the hike was inevitable due to mounting deficits and debts.

[REPORT]
What is distinctive about the latest hike in electricity rates for industrial use is raising charges differently depending on the amount of consumption.

It will go up 10.2 percent for the large-volume electricity used by large corporations. But for small and mid-sized businesses, the raise is just half of it.

Power bills for households and smaller businesses have been frozen for one year and six months due to concerns over inflation.

The government explained that a larger burden is placed on large, export-oriented corporations with greater financial capability.

Choe Nam-ho / 2nd Vice minister of Trade, Industry and Energy
Power rates account for 1.4 percent of production costs for large exporters. The raise will have little impact on domestic consumer prices.

The state-run Korea Electric Power Corporation said that the hike is inevitable to reduce its deficit, which has piled up, as it kept electricity charges lower than the production cost even when international fuel prices were soaring amid Russia's war in Ukraine.

From 2021 to the first half of this year, the company's accumulated deficit amounted to 41 trillion won or nearly 30 billion U.S. dollars.

Indebted with nearly 203 trillion won or over 146.9 billion dollars, it pays an interest of 12.2 billion won or 8.83 million U.S. dollars per day.

Despite six rate hikes since 2022, KEPCO said that another raise is inevitable to ease the accumulated deficit.

Kim Dong-cheol/ KEPCO CEO
Electricity charges are lower than the production cost. It is among the lowest in the OECD.

The latest hike is expected to enable the power company to earn an additional 4.7 trillion won or some 3.4 billion U.S. dollars annually.

Industrial users account for a mere 1.7 percent of its total customers. But they take up 53.2 percent of the total consumption.

However the industrial sector expressed concerns over the power price hike.

Cho Young-joon/ Korea Chamber of Commerce and Industry
It will likely place a burden on business activities and undermine industrial competitiveness.

Regarding the possibility of more raises in the future, the government said there are no reasons to raise electricity charges if oil prices remain stable.

But it predicted that the interest rate and the foreign exchange rate will be the main variables.