November 24, 2016 / 1:00 AM / a year ago

S. Korea to propose three plans to revamp residential electricity prices

SEOUL, Nov 24 (Reuters) - South Korea will propose three plans to parliament on Thursday to revamp its electricity tariffs to alleviate the burden on households during peak power usage periods, its energy ministry said.

The government faced a public backlash after residential users were slapped with heavy bills this summer under the current pricing system as air conditioning usage peaked. The tariff now breaks up users into six brackets, or stages, depending on their consumption.

South Korea, Asia’s fourth-largest economy, applied the six-stage system to households to curb power use by imposing higher rates for heavy users, while offering electricity at fixed prices for industrial users to reduce their cost burden and enhance competitiveness.

“We are planning to change (the current six-stage tariff system) to the three-stage and this will apply to December bills retroactively,” Kim Yong-rae, director general for energy industry policy at the Ministry of Trade, Industry and Energy, told Reuters ahead of the announcement.

Under the current system, residents that use less than 100 kilowatts per hour (kWh) would pay only 60.7 won per kWh while those that consume more than 501 kWh would pay 709.50 won per kWh. That works out to a gap of about 11.7 times between the lowest and highest prices.

But the three-stage system could narrow that price gap to about three times, according to the ministry.

The first proposed three-stage system would reduce residential power costs by 10.4 percent, while the second proposal would cut them by 11.5 percent and the third by 11.6 percent, the ministry said.

Industrial users were charged 107.41 won per kWh last year, lower than the average of 123.69 won per kWh for residential users, according to data from state-run utility Korea Electric Power Corp (KEPCO).

Industrial electricity consumption accounted for more than 56 percent of total usage and household consumption made up about 13 percent. Schools, agriculture and commercial users made up the rest.

The ministry is not planning to increase power charges for industrial users at the moment as their tariffs have been hiked several times before, Kim said.

To address the criticism over the progressive electricity billing system, Korea’s energy ministry cut residential electricity tariffs in August for the July to September quarter by 420 billion won temporarily.

The energy ministry will hold a public hearing next Monday with KEPCO before they finalise details.

$1 = 1,176.1000 won Reporting By Jane Chung; Editing by Christian Schmollinger

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