S Korea Hikes Power Prices to Avoid Blackouts

South Korea said last week it will hike electricity tariffs and lower consumption taxes on liquefied natural gas, propane and kerosene in a bid to avert power blackouts and reduce losses for the state-run utility company.
The government hopes higher electricity prices will curb power use. Rural households could use propane and kerosene for such daily needs as cooking and heating, while industrial users could use LNG or other fuels to power manufacturing processes.
That would alleviate pressure on power generation capacity after a spate of nuclear plant shutdowns.
South Korea has been trying to avoid blackouts during peak summer and winter demand periods as some of its 23 nuclear reactors remain shut due to safety scandal. A third of the country’s power comes from nuclear reactors.
“Given the limits on increasing capacity to meet the growing demand (for electricity), managing the power supply situation through stronger management of demand is inevitable,” Han Jin-hyun, vice energy minister, said at a press briefing.
The energy and finance ministries said in a joint statement that state-run Korea Electric Power Corp. (KEPCO) will raise electricity prices by an average 5.4 percent, with industrial users facing the biggest hike.
Higher electricity tariffs may help alleviate financial pressures for KEPCO, which said last month it is considering raising electricity charges for industrial users, after running up massive losses as part of a government initiative to curb inflation.
The company accumulated 12.8 trillion won ($12.1 billion) of losses between 2008 and the first half of 2013, it said.
But KEPCO vice president Lee Tong-seung said the tariff hikes were not related to the firm’s efforts to shore up its finances.
“Today’s price hikes were decided based on the need for rational distribution of resources by refining the tariff system,” Lee said.
According to KEPCO data, industrial users were charged 93.2 won per kilowatt hour in 2012, compared with generating costs of 114 won per kilowatt hour. Industry accounted for 56 percent of total consumption.
Charges to commercial users were 112.5 won per kilowatt hour and 123.7 for residential users.
The ministries also said they will submit legislation to parliament seeking to impose a new consumption tax on coal imports for power stations starting next year. This would ultimately push up the cost of electricity and further encourage consumers and industry to use other fuels.
The lower taxes on LNG, propane and kerosene are scheduled to take effect in 2014.
The country’s nuclear regulator cleared the way last week for one of six closed nuclear reactors to restart after checks on welding. It also said it had approved replacement cables for three more shut in a safety scandal, but it was unclear when those would restart.                                                       Reuters