Root Industry Appeals for Relief from Energy Cost Burdens Including Electricity Rate Adjustments

Korea Federation of SMEs Holds the 2nd Root Industry Committee Meeting

The Korea Federation of Small and Medium Business (Kbiz) announced on the 6th that it held the 2nd 'Root Industry Committee' for 2024 at the Kbiz headquarters in Yeouido.

The committee was formed to devise countermeasures to strengthen the industrial competitiveness and growth of small and medium-sized enterprises (SMEs) related to the root industries, which are the foundation of manufacturing such as mold, casting, and plastic processing.

The committee included representatives of industry-specific cooperatives, including Chairman Kim Dong-hyun of the Gyeonggi Casting Industry Cooperative, Chairman Eun Jong-mok of the Korea Welding Industry Cooperative, Chairman Kwon Deok-ro of the Korea Metal Fence Industry Cooperative, Chairman Lee Soo-kyun of the Busan Gyeongnam Mold Industry Cooperative, Chairman Noh Jong-ho of the Gwangju Jeonnam Jeju Plastic Industry Cooperative, and Chairman Seol Pil-su of the Banwol Surface Treatment Business Cooperative.

On this day, the committee held a session to discuss the current issues and challenges faced by root companies, which are experiencing management difficulties such as deteriorating operating profits due to the recent cumulative increase in industrial electricity rates by the government.

Participants appealed, “Root companies such as heat treatment and casting, which have monthly electricity bills exceeding hundreds of millions of won, will have to bear an additional burden of tens of millions of won every month due to this increase,” adding, “The repeated recent increases in industrial electricity rates have placed these companies on the brink of survival.”

They further requested, “Please promptly prepare adjustments to electricity rates for root SMEs at least, including seasonal rates (applying spring and autumn rates instead of June and November rates) and time-of-use rates (applying off-peak rates during daytime Saturdays instead of mid-peak rates).”

Following this, the presentation on the ‘Rationalization of Industrial Electricity Rates’ continued discussions on overall SME energy policies, including rationalizing industrial electricity rates by season and time, and supporting energy efficiency improvement policies.

Kim Jae-hyuk, a research fellow at the Korean Association of Public Finance, stated, “An analysis of the average maximum power consumption over the past three years (’22-24) showed that power consumption in June and November was closer to that of spring (May) and autumn (October), respectively, and that power demand during mid-peak hours (8 a.m. to 10 p.m.) on Saturdays in spring and autumn was 15% lower than on weekdays,” adding, “It is possible to consider temporary adjustments to seasonal and time-of-use rates for root companies facing management difficulties.”

He continued, “South Korea has become entrenched in a high-consumption, low-efficiency energy structure, and the budget for energy efficiency has decreased by 43% in 2023 compared to 2010,” adding, “Seventy-six percent of the related budget is government-led loan projects with low incentives for SMEs to participate. It is necessary to actively promote energy efficiency incentive policies, such as reducing the electricity industry infrastructure fund charges when efficiency improves.”

Kim Dong-hyun, chairman of the Root Industry Committee, said, “The management environment for root SMEs is very difficult due to the recent domestic demand slump and economic downturn, and it is very regrettable that only industrial electricity rates, which have a high cost recovery rate, were increased again last month while other uses were frozen.”

Chairman Kim added, “The ‘seasonal and time-of-use rate adjustments’ and ‘inclusion of electricity fees in the application of the delivery price linkage system,’ which have been continuously proposed, must be implemented promptly,” and “Ultimately, multifaceted support measures are needed to alleviate energy cost burdens, such as improving energy efficiency for the energy structure transition of SMEs.”