Industrial electricity rates in South Korea's southern regions, including the Honam and Yeongnam areas, will fall by as much as about 10% under a new pricing system. The government will divide the country into four zones and apply larger discounts to areas farther from the greater Seoul area, aiming to draw corporate investment to the provinces and ease the burden of building transmission networks for long-distance power delivery.
The Ministry of Climate, Energy and Environment and KEPCO unveiled the design of the regional industrial electricity rate system at a public hearing held on the 26th at KEPCO's Southwest Seoul headquarters in Yeongdeungpo, Seoul. Until now, the same industrial rate applied nationwide regardless of location. The core of the plan is to charge lower rates in provinces closer to where electricity is generated.
Under the plan disclosed at the hearing, the government will divide the country into four broad zones and apply different industrial rates to each. In the southern zone, covering the Honam and Yeongnam regions, industrial rates will drop by 13 to 18 won. Based on last year's average industrial selling price of 181.9 won per kilowatt-hour, that translates into a reduction of 7% to 10%.
Rates in the central zone, covering the Chungcheong and Gangwon regions, will fall by 10 to 15 won, or 5% to 8%, while the northern part of the greater Seoul area will see cuts of 6 to 10 won, or 3% to 8%. For the southern part of the greater Seoul area, the regional adjustment is set at a reduction of zero to 1 won, leaving industrial rates virtually unchanged from current levels.
Rates may also vary within a single zone depending on administrative district. The government will sort administrative districts into four tiers using a regional preference index under development by the Ministry of the Interior and Safety, along with designations such as industrial crisis regions. The climate ministry said that, taken together, the country will be divided into 11 areas subject to differentiated industrial rates.
Chun Hyun-min, head of KEPCO's rate strategy office, explained the rationale for the differentiated rates, saying, "About 40% of the electricity used in the greater Seoul area is supplied from outside the region, and the costs of long-distance transmission and grid construction are rising sharply."
The government estimated that the system will reduce industrial electricity costs by about 2.8 trillion won a year. Some, however, worry that the rate cuts will add to KEPCO's financial strain. An official at the climate ministry said, "We will also differentiate the system marginal price, which KEPCO pays to buy electricity from generators, by region to ease that burden."
Major business and industry groups, including the Korea Chamber of Commerce and Industry, the Federation of Korean Industries and the Korea International Trade Association, all welcomed the government's plan. They said the introduction of regional pricing and the overall move toward lower rates will reduce costs, spur investment and contribute to balanced regional development.
