[Reporter’s Notebook] The De Facto Postponement of Residential Electricity Rate Hikes Since the General Election

"This electricity rate adjustment is not influenced by political considerations such as political parties' interests or the general election," said Kang Kyung-sung, the 2nd Vice Minister of the Ministry of Trade, Industry and Energy, on the 8th while announcing the electricity rate adjustment plan to reporters. Instead, he explained, "We comprehensively considered the deteriorating financial structure of Korea Electric Power Corporation (KEPCO), the selling price lower than the cost, and the previous five rate hikes." This decision to freeze residential rates and only raise industrial electricity rates highlights that it is a 'government's own decision' made through consultations with related agencies such as the Ministry of Economy and Finance and KEPCO, rather than a political judgment. Kim Dong-chul, KEPCO president, also emphasized that the government is the entity responsible for rate formation by expressing gratitude to the government for making the decision to raise electricity rates even in the run-up to the election.

The government and KEPCO, seemingly aware of criticism regarding the 'politicization of electricity rates,' changed the subject and location of the announcement compared to the rate adjustment in the second quarter. Former Minister of Industry Lee Chang-yang, after a ruling party-government meeting on electricity and gas rates held at the National Assembly on May 15, visited the Gwanghwamun Government Seoul Office to brief on the increase results. However, this time, the electricity rate adjustment plan was announced at the Government Sejong Complex with the attendance of the Ministry of Trade, Industry and Energy’s vice minister and KEPCO president. The ruling party, government, and the Presidential Office had held a high-level party-government meeting in private on the 5th to discuss whether to raise electricity rates.

Among industrial users (approximately 440,000 households), only the industrial 'Type B' electricity rates used by large corporations, which are large-volume customers, were raised by an average of 10.6 KRW per kilowatt-hour (kWh), while residential, general-use electricity rates, and industrial 'Type A' rates used by small and medium enterprises were frozen. This decision does not align with the beneficiary-pays principle or cost-based pricing. Due to this industrial (Type B) rate increase, medium-sized and large corporations subject to this rate will have to pay an additional 4.31 million KRW per month. Regarding this, Vice Minister Kang said, "Industrial (Type B) users consume about 100 times more electricity than households and have enjoyed cheap electricity rates until now," adding, "Companies can overcome the burden of the rate increase by improving energy efficiency and management efficiency." As a result of applying a higher rate increase to industrial electricity rates, in November last year, residential rates were 128.99 KRW per kWh, and industrial rates were 143.04 KRW per kWh, making industrial rates more expensive. Right after the announcement of the electricity rate adjustment plan, economic organizations urged the government to prepare countermeasures, saying, "We need to examine whether this 'pinpoint' increase aligns with the principle of cost-based electricity rates." Industrial electricity is supplied at high voltage and in large quantities, so the power supply cost is lower than that of residential use.

The 'fuel cost linkage system,' where electricity rates rise when oil prices increase, was implemented in 2021. The 'cost-based electricity rate principle' has been emphasized by President Yoon Suk-yeol since his presidential candidacy. It is hoped that the electricity rate adjustment system, whose policies and systems are already set by the government, will function properly going forward.