May Residential and General Urban Gas Rates Frozen... Ministry of Industry Says "To Reduce Burden on Low-Income Households"

[Sejong=Asia Economy Reporter Joo Sang-don] The government has frozen the residential and general urban gas rates for next month. Despite factors such as rising oil prices, the decision was made to freeze the rates to stabilize the economy for low-income households.

On the 29th, the Ministry of Trade, Industry and Energy announced that it will freeze the urban gas rates for residential and general use, which are used by the general public and self-employed individuals.

The residential and general rates are closely related to the daily lives of the public and have been frozen since their reduction in July last year to stabilize the economy for low-income households.

An official from the Ministry of Trade, Industry and Energy explained, "Although there were factors for a 5.5% increase in rates as of May (based on wholesale rates) due to fluctuations in international oil prices and exchange rates, the decision to freeze the rates was made considering the burden on low-income households caused by COVID-19, the recent continuous inflation trend, and the scale of unpaid receivables of Korea Gas Corporation."

For industrial and other uses, rates are adjusted monthly reflecting changes in oil prices and exchange rates according to the natural gas raw material cost linkage system. Next month's rates will be reduced by 5.4% to 11.3% from the previous month starting from the 1st of next month, as the winter price increase volume has recently been resolved.

The supply cost for power generation, which was applied differentially by season (winter, summer, and others), will be applied as a single annual rate starting from May 1st. Domestic natural gas demand has shown a "high in winter, low in summer" pattern, with demand concentrated in winter. To encourage voluntary demand reduction in winter, a seasonal differential rate system has been applied to supply costs for power generation and others. However, since power generation is carried out according to the Korea Power Exchange's generation plan and the effect of voluntary demand management based on natural gas rates is considered limited, it has been decided to apply a single annual rate for power generation.