It is time to cut energy consumption, raise efficiency
Consumers and businesses will feel a higher burden from their energy use after the government increased utility charges Oct. 1. Last Friday, the government decided to raise electricity rates and natural gas prices by 6.9 percent and 15.9 percent, respectively, for households. The charges for industrial and commercial use also went up by as high as 17.4 percent and 16.6 percent, respectively.
Such hikes were belated but inevitable, given the soaring global energy prices amid the Russian war on Ukraine. The Yoon Suk-yeol administration should have pushed up electricity and gas rates by a bigger margin earlier. But it had refrained from doing so in order to reduce inflationary pressure artificially and woo voters to support the ruling party ahead of the June 1 local elections.
The previous Moon Jae-in government had also refrained from raising utility rates, due primary to its nuclear energy phase-out policy. It only increased electricity rates once during its five-year tenure because then-President Moon promised to push the policy without increasing costs. So the utility rates remain lower than what they could be.
The country has long ignored the principle of supply and demand, which determines the prices of goods under a free market system. Now, the government can no longer maintain utility rates below production costs. It must adjust the bills higher in accordance with market principles. Friday's hike decision does not appear to be enough to catch up with higher global energy prices.
The government's suppression of power rate hikes has led to losses for Korea Electric Power Corp. (KEPCO). The state utility's operating loss is expected to jump to 28 trillion won ($19.4 billion) this year from last year's 5.8 trillion won. Its debt has also climbed sharply, raising concerns about its financial health. The company's losses and debt will have to be covered by mobilizing taxpayers' money or increasing electricity bills further.
The Yoon administration should not kick the can down the road. The artificially low power rates have contributed to the overconsumption or waste of electricity by both households and businesses. Korea placed third in the global ranking of per capita energy use last year, following Canada and the U.S. Korea's imports of oil, gas and coal surged by 90 percent during the first eight months of this year from a year earlier. Recognizing this problem belatedly, the government has launched a campaign to reduce energy consumption by 10 percent.
The campaign should serve as an opportunity for the country to transform its economic and industrial structure into one that can reduce energy use by increasing efficiency. Such a change is also crucial to speeding up the transition to renewable energy and achieving carbon neutrality by 2050. Saving energy is also necessary to reduce energy imports, improve the trade imbalance, ease inflationary pressure and stabilize the won-dollar exchange rate.
Consumers and businesses will feel a higher burden from their energy use after the government increased utility charges Oct. 1. Last Friday, the government decided to raise electricity rates and natural gas prices by 6.9 percent and 15.9 percent, respectively, for households. The charges for industrial and commercial use also went up by as high as 17.4 percent and 16.6 percent, respectively.
Such hikes were belated but inevitable, given the soaring global energy prices amid the Russian war on Ukraine. The Yoon Suk-yeol administration should have pushed up electricity and gas rates by a bigger margin earlier. But it had refrained from doing so in order to reduce inflationary pressure artificially and woo voters to support the ruling party ahead of the June 1 local elections.
The previous Moon Jae-in government had also refrained from raising utility rates, due primary to its nuclear energy phase-out policy. It only increased electricity rates once during its five-year tenure because then-President Moon promised to push the policy without increasing costs. So the utility rates remain lower than what they could be.
The country has long ignored the principle of supply and demand, which determines the prices of goods under a free market system. Now, the government can no longer maintain utility rates below production costs. It must adjust the bills higher in accordance with market principles. Friday's hike decision does not appear to be enough to catch up with higher global energy prices.
The government's suppression of power rate hikes has led to losses for Korea Electric Power Corp. (KEPCO). The state utility's operating loss is expected to jump to 28 trillion won ($19.4 billion) this year from last year's 5.8 trillion won. Its debt has also climbed sharply, raising concerns about its financial health. The company's losses and debt will have to be covered by mobilizing taxpayers' money or increasing electricity bills further.
The Yoon administration should not kick the can down the road. The artificially low power rates have contributed to the overconsumption or waste of electricity by both households and businesses. Korea placed third in the global ranking of per capita energy use last year, following Canada and the U.S. Korea's imports of oil, gas and coal surged by 90 percent during the first eight months of this year from a year earlier. Recognizing this problem belatedly, the government has launched a campaign to reduce energy consumption by 10 percent.
The campaign should serve as an opportunity for the country to transform its economic and industrial structure into one that can reduce energy use by increasing efficiency. Such a change is also crucial to speeding up the transition to renewable energy and achieving carbon neutrality by 2050. Saving energy is also necessary to reduce energy imports, improve the trade imbalance, ease inflationary pressure and stabilize the won-dollar exchange rate.
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