South Korea will raise electricity prices by an average of 4.9 percent from the start of August, the country's Ministry of Knowledge Economy (MKE) announced on July 26. However, prices for low-tension electricity and high-tension electricity for industrial use will be raised by 2.3 percent and 6.3 percent, respectively.
"The current power tariffs cover only 86.1 percent of production cost for electricity but the government has decided to raise them by a minimum after considering the burden on low income-earners and inflation," the government said in a statement.
It is noteworthy that the government will apply different increase rates to electricity prices. The price for low-tension electricity for household consumption and small and mid-sized enterprise consumption will increase by 2.3 percent from August, while those for high-tension electricity for use at large-sized enterprises will increase by 6.3 percent. Thus, such South Korean steelmakers as POSCO, Hyundai Steel, Dongkuk Steel and Donbu Steel which operate electric arc furnaces will face an increased cost burden from the electricity rate hike.
Meanwhile, the South Korean government is seeking a new system according to which electricity consumers pay more for industrial and commercial use when demand peaks, in an attempt to diffuse demand for electricity.