Energy ministry’s belated move to cut power utility rates

Energy ministry’s belated move to cut power utility rates. August. 13, 2016 07:07. by 권순활논설위원 shkwon@donga.com.

The Trade, Industry and Energy Ministry and the ruling Saenuri Party agreed to cutting electric rates by an average of 19.4 percent for 22 million households by easing the progressive utility rate system temporarily from July to September this year at a party-government meeting on Thursday. The two sides also agreed to reshuffle the progressive utility rate system from a mid- to long-term perspective by forming a joint taskforce with experts. The Trade, Industry and Energy Ministry, in charge of utility rate regulations, has just revealed its ungainly image of "mindless bureaucrats."

Public criticism started mounting against a "electric utility cost bomb," which was triggered by the progressive rate system for households as power consumption began to surge amid scorching weather from late last month. However, Chae Hee-bong, head of the ministry’s energy and natural resources office, claimed on Tuesday, “If a household uses the air conditioner for four hours a day, the electricity bill will not exceed 100,000 won (91 U.S. dollars) per month. The term "electric utility cost bomb" is exaggeration." But his remarks just fueled anger among the public. Some ministry officials even said that easing the progressive electric rate system equals a tax cut for the rich.

In just three hours after President Park Geun-hye announced her intention to cut utility rates at a meeting with Saenuri’s leadership on Thursday, the ministry came up with a corrective measure through a party-government consultative meeting. It is hard to even imagine the ministry’s behavior of reiterating its plan not to reshuffle the rate system by doggedly turning a deaf ear to the criticism of "electricity rate bomb." The problem does not lie only in the ministry. As revealed by easing of the rules on definition of conglomerates by the Fair Trade Commission in April, government ministries are feared to have developed as their habit the act of having apathetic attitude to issues, unless instructed by the president.

According to data released by CEO Score in February this year, 20 former staff of the Trade, Industry and Energy Ministry are working as bureaucrat-turned chiefs and CEOs at state-run institutions and companies, which is the most for a single ministry out of 104 top officials in total. KEPCO CEO Cho Hwan-ik, whose annual salary is earns 236 million won (212,000 dollars), is also from the Trade, Industry and Energy Ministry. He had served as the vice minister of the ministry during the Roh Moo-hyun administration. Apart from chiefs and presidents, many of those bureaucrats have been relocated to state-run companies or private companies as auditors or executives. Critics say that the reason the ministry has been avoiding reshuffle of the progressive electric rate system for households may be due to government-business connection.

The progressive electric rate system, which was set in 2005, entails six levels of progressively increasing rates, with the gap in unit price of power amounting to 11.7 times, ranging from the lowest grade of Level 1 to the highest grade of Level 6 . This is a punitive rate system that can be found nowhere in the world. The Board of Audit and Inspection recommended the Trade, Industry and Energy Ministry to improve the system in June 2013, and KEPCO CEO Cho Hwan-ik also admitted to the need to upgrade the system at last year's parliamentary inspection of the government. The ministry should accelerate its efforts to correct abnormality in the electric utility rate system for households with the aim of implementing it by year’s end, rather than only taking a stopgap measure. The government should also be prepared to prevent potential shortages of power supply due to easing of the progressive electric rate system.