Electricity rates used by corporations and individuals are decided after deliberation by the Electricity Commission, an administrative commission under the Ministry of Climate, Energy and Environment. The Lee Jae-myung administration's national agenda includes strengthening the Electricity Commission's independence.
On this, the climate ministry, which has the Electricity Commission under it, is in favor, while the Ministry of Economy and Finance, which is not organizationally related, is reportedly opposed. ChosunBiz looked into the circumstances on the 25th.
◇ To raise electricity rates, the climate ministry and the economy ministry must consult... frozen for more than two years over "inflation concerns"
Under the Electric Utility Act, Korea Electric Power Corporation (KEPCO) must undergo Electricity Commission deliberation to change electricity rates. Launched in 2001, the Electricity Commission consists of nine members, including the Chairperson. Commissioners are appointed by the president upon the recommendation of the Minister of the climate ministry.
However, even if the Electricity Commission passes a rate hike plan, KEPCO cannot raise rates right away. The final decision must be made by the Minister of the climate ministry in consultation with the economy ministry. The Price Stabilization Act stipulates that public utility rates such as electricity, which have a large impact on people's lives, should be decided by the competent ministry in consultation with the economy ministry, which oversees price policy.
Inside and outside the government, there has been criticism that because of this rate-setting structure, electricity rates have not been raised in a timely manner despite higher costs. The economy ministry has been lukewarm about raising electricity rates out of concern for inflation, the criticism goes.
Household electricity rates have been frozen for 11 straight quarters since May 2023, while only industrial rates, which face less political resistance, have risen more than 60% over the past three years. As a result, KEPCO's financial burden has grown. As of the end of last year, KEPCO's total debt exceeded 200 trillion won, and daily interest alone amounts to 12 billion won.
◇ Climate ministry: "Costs must be properly reflected"... economy ministry: "Directly leads to inflation"
The climate ministry's position is that to make electricity rates more realistic, it is necessary to reduce the economy ministry's influence over the Electricity Commission and strengthen the commission's independence. The economy ministry counters that it is difficult to leave all electricity rate decisions to market logic. Because rate hikes directly lead to higher consumer prices, the price authority's role of intervening in the middle should be maintained, it says.
For now, since the Lee Jae-myung administration's national agenda includes "strengthening the Electricity Commission's independence," the climate ministry's argument is expected to gain momentum. In the National Assembly, discussions on reorganizing the Electricity Commission are also in full swing. The bills on reorganizing the Electricity Commission proposed by the ruling Democratic Party of Korea fall broadly into three categories. ▲ Expanding and reorganizing it into the Electricity, Gas and Heat Commission under the Prime Minister's Office (Rep. Kim Jeong-ho of the Democratic Party of Korea) ▲ Creating an Energy Rates Commission at the level of a central administrative agency (Rep. Kim So-hee of the People Power Party) ▲ Granting the Electricity Commission the authority to vote on electricity rates (Reps. Park Ji-hye and Huh Sung-moo of the Democratic Party) and so on.