KEF Calls for Reform of Industrial Electricity Rates
Proposes Four Key Measures to Ease Corporate Burden
Concerns have been raised that domestic companies' production and investment activities could be curtailed as industrial electricity rates have increased at twice the rate of general and residential rates over the past three years.
On the 25th, the Korea Employers Federation (KEF) released a report titled "Measures to Alleviate the Burden of Industrial Electricity Rates to Strengthen Corporate Competitiveness," revealing these findings. According to the report, over the recent three years (2022?2024), industrial electricity rates increased by 80 KRW per kWh, whereas residential and general rates rose by 40.4 KRW.
To analyze the impact of electricity rate hikes by industry on corporate management activities, KEF conducted a survey of 112 companies across various sectors. The survey results showed that the average electricity bill paid by respondent companies increased by 36.4% over the past three years, and the proportion of electricity costs relative to sales rose significantly from 7.5% in 2022 to 10.7% in 2024.
In response to soaring electricity rates, companies are exploring various measures such as ▲replacing equipment with high-efficiency facilities (44%), ▲raising product prices (39%), ▲suspending or reducing operating hours of equipment (38%), and ▲shifting work hours to cheaper nighttime or weekends (27%).
When asked about government support measures to alleviate the electricity cost burden, there was a unanimous call to reform the industrial electricity rate system. Specifically, they pointed to ▲improving seasonal and time-of-day rate plans that reflect actual demand (63%) and ▲implementing separate rate plans for industries with stable load factors (41%).
Accordingly, KEF and the business community proposed "four major institutional improvement tasks" for reforming the industrial electricity rate system.
First, they suggested improving seasonal and time-of-day rate plans to better match actual demand and implementing separate rate plans for industries with stable load factors. They also advocated for specifying the criteria for deferring fuel cost adjustment charges. Currently, although there is a regulatory basis allowing the Minister of Trade, Industry and Energy to defer increases in fuel cost adjustment charges when international oil prices or exchange rate volatility expands, there are no concrete standards. Lastly, they emphasized the importance of improving the method of imposing basic charges for industrial electricity.
Im Woo-taek, Head of Safety and Health at KEF, stated, "The concentrated rate hikes on industrial electricity have significantly curtailed companies' production and investment activities," adding, "To ease the already strained corporate burden, excessive rate increases need to be restrained."
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