August 27 2002 – South Korea plans to change to a cost-based electricity tariff system to prepare the sector for privatisation, lifting prices for industrial users but cutting them for households, the energy ministry said on Monday.


Under a broader reform drive, Seoul plans to restructure its electricity industry, kicking off privatisation of five thermal power units of state-run power monopoly Korea Electric Power Corp (KEPCO) in a presidential election year.

The new system is aimed at narrowing huge gaps in power tariffs among users of different sectors, it said.

“Various kinds of power trading is taking place and the function of price becomes more important as competition is being introduced, so the fee system should also adopt the changes,” the ministry said in a statement.

Under the proposed new system, there would be a ten per cent fee hike for industrial use, an eight percent cut for household use and around a 20 per cent reduction for commercial use, it said. Farmers would also have their fees raised.

Under the current system each sector is charged a different fee. For example, households now pay a higher fee of 94.72 won ($0.789) per kilowatt hour (kWh), while industrial consumption is charged at 58.30 won per kWh.

The new system follows a two-year review by the government-funded Korea Energy Economics Institute (KEEI) and the government will hold public hearings across the country, it said.

The KEEI suggested the government carry out the new system before the start of the privatisation of the power distribution division of KEPCO, expected to kick off in March, 2004, it said.