South Korea’s energy ministry submitted three different proposals to parliament on Thursday for new electricity tariffs as it seeks to simplify a complex price banding system and ease the burden on household consumers during peak usage periods. The government faced a public backlash in summer after the existing pricing system, comprising six tariff bands, landed residential users with heavy bills as they as cranked up air conditioning use.
In a temporary measure responding to the criticism, Korea’s energy ministry cut residential electricity tariffs in August for the July-September quarter by 420 billion won ($355 million) in total.
Under each of the ministry’s new proposals, customers will be bracketed in three bands, reducing the difference in price between how much residential and industrial users pay. Jumps in prices during seasonal demand spikes will be kept to a minimum, the ministry said.
“We will make sure to not increase the burden on Korean people by Korea Electric Power Corp (KEPCO) cushioning price hikes as much as possible during winter and summer seasons,” Joo Hyung-hwan, Minister of Trade, Industry and Energy told lawmakers in a parliament session.
“We will hold a public hearing on November 28 and will finalise all administrative procedure before mid-December and apply the change from Dec. 1 retroactively,” Joo said.
The energy ministry will hold a public hearing next Monday with state-run KEPCO before finalising details.
Under the six-band system in place currently, residential customers face higher rates during heavy usage, while industrial users buy electricity at fixed prices. That can mean the highest prices paid are 11.7 time more per kilowatt/hour than the lowest charges.
Under each of the three-stage systems up for consideration, that price gap would be narrowed to a factor of about three times, according to the ministry.
Industrial electricity consumption accounted for more than 56 percent of total usage and household consumption made up about 13 per cent. Schools, agriculture and commercial users made up the rest.
The ministry is not planning to increase power charges for industrial users at the moment as their tariffs are higher than generation costs, minister Joo said.