A draft of a region-based electricity rate plan that would cut industrial power rates in southern regions such as Yeongnam and Honam by up to 10%, or as much as 18 won per kWh (kilowatt-hour), has been released. It also includes a plan to further differentiate rates within the same macro region based on each area's level of underdevelopment.
The Ministry of Climate, Energy and Environment and Korea Electric Power Corporation (KEPCO) held a public hearing at KEPCO's South Seoul office on the 26th and unveiled a design plan for the "industrial regional electricity rate system." The key is to add a "regional adjustment charge" to the existing structure of basic charges and energy charges to lower rates by up to 10% by region without raising overall rates.
Regions will be divided into four macro areas reflecting the power grid (northern capital region, southern capital region, central region, and southern region), and within each macro area they will be further segmented into up to four tiers (zones 1–4) according to the Ministry of the Interior and Safety's local preferential index. The local preferential index quantifies how marginalized an area is by factoring in distance from Seoul, whether the population is declining, and economic and social conditions.
However, not every macro area will be split into four zones. The climate ministry said the final map will consist of 11 regions. The detailed zoning will be finalized by incorporating industrial factors, including industrial crisis areas. Jeju was excluded from this round in light of the island region's unique circumstances.
The size of the electricity rate adjustment is largest in the southern region, where nuclear and renewable energy are concentrated, at 13–18 won per kWh; 10–15 won in the central region, which includes Gangwon and Chungcheong; and 6–10 won in the northern capital region, which includes Incheon. The southern capital region, where demand is concentrated, will see only 0–1 won, effectively offering no discount. Rates were calculated by combining transmission costs for using the transmission network, the power self-sufficiency rate by macro area, and a balanced growth factor reflecting the local preferential index. The government estimated the reduction in the industrial rate burden from this measure at 2.8 trillion won.
An official at the climate ministry said, "If the rate plan is introduced together with the regional wholesale pricing system in the power market, it will promote the transfer of power demand out of the capital region and the dispersion of generation facilities," adding, "We also expect increased investment in high-tech industries outside the capital area, job creation, and stronger export competitiveness as existing regional corporations see lower production costs." KEPCO's financial burden will be minimized by introducing the regional wholesale pricing system and providing government fiscal support in parallel.
Minister Kim Seong-hwan of the climate ministry said, "By attracting non-capital-region investment from power-intensive industries, this will reduce the burden of building transmission networks and serve as a catalyst to enhance national balanced development and the industry's long-term competitiveness."
The government plans to finalize the design by reflecting input from the public hearing and to swiftly complete follow-up steps, including issuing the enabling notice and revising the electricity rate terms and conditions, to implement the system within the year.