Can new plan to forcefully cut corporate power use work?

Can new plan to forcefully cut corporate power use work?. November. 16, 2011 00:19. mint4a@donga.com.

In August 2012, amid surging power demand nationwide as the temperature tops 30 degrees Celsius from morning, a petrochemical company in Yeosu Chemical Industry Complex receives a request “to reduce electricity consumption from 2 to 3 p.m.,” noting use is about 10 percent higher than normal.

As the power supply enters the phase of “attention,” in which reserve electricity falls to the level of 4 million kilowatts, Korea Electric Power Corp. urgently sends the company a cooperation request while monitoring the latter`s electricity use via real-time electric meter.

According to the first draft of "a long-term electricity supply plan” by the Knowledge Economy Ministry obtained by The Dong-A Ilbo Tuesday, such a situation will likely become reality from next summer.

After preparing the legal grounds to make consumer information into a public resource, the government is devising measures for consumer industries of a certain size or larger to share and manage information in real time with the power company and Korea Power Exchange by installing real-time electric meter.

Under consideration is a demand forecast center and the introduction of a “fast track” system involving the construction of power plants by simplifying permission and approval processes. Experts say, however, that the latest “long-term” plan is yet another stop-gap measure that fails to tackle the fundamental problem of raising electricity fees to the level of real costs.

○ Is another organization a long-term solution?

A task force for improving the response system for an electrical power crisis is preparing a draft plan to improve long-term electricity supply as the final report on the Sept. 15 mass blackout. The plan includes a proposal to establish a “Demand Forecast Center,” meaning the existing demand forecast team at the power exchange alone cannot properly predict the rapidly changing demand.

No one can guarantee that the capacity to forecast demand will improve even if a new team is established. An expert who is a member of the government task force said, “Expansion of personnel in charge of forecasting demand will end up boosting the size of the organization and creating a higher chain of command,” adding, “The forecast capacity can be adequately improved just by reshuffling the personnel system at the Korea Power Exchange and using external experts.

The National Assembly is also moving to reintegrate the power exchange’s function of supply operation with the power company. The government is even considering setting up a separate state company by splitting off the power company`s transmission operations when related bills are passed.

The proposed introduction of a fast track seeks to minimize the assessment of environmental impact required for the construction of a power plant and reduces the process for permission and approval. According to the system, if the central government requests metropolitan and provincial governments to simplify the process for the construction of power plants, the latter must cooperate.

Environmental groups and provincial residents, however, oppose the attraction of thermal power plants to their regions nationwide. The system could amplify social conflict when introduced.

○ Limited capacity to regulate by mobilizing administrative force

Many call the plan on the supply and demand of electricity, which was announced by the Knowledge Economy Ministry last Thursday, a stop-gap measure. The centerpiece of this proposal is to force the private sector to save electricity to help maintain stable power supply.

The new system imposes on companies a certain volume of power consumption that they must cut, unlike the conventional system that gives discounted rates as incentives to companies that do not use electricity in peak times.

Under the proposed law, companies that consume more than 1,000 kilowatts of electricity must reduce power consumption by 10 percent between Dec. 5 and late February next year from the same period of the previous year. Violators will face a fine of up to 3 million won (2,700 U.S. dollars).

Many companies, however, are pessimistic about the government’s proposed measure to forcefully cut power consumption. The government says companies can adjust their operating hours or production volume by operating on holidays, but companies think changing the conventional production method is not easy.

○ Consensus for reshuffling utility rate systems

Electricity industry experts say measures announced by the government following the Sept. 15 blackout do not serve as fundamental solutions. The actions do not include a hike in utility rate or a plan to secure cheap electricity by expanding nuclear power plants, a power source that became less attractive following the March nuclear reactor accident in Japan

The Korean government also agrees that the fundamental solution to a power shortage is to send appropriate price signals to industries and the public. Both the political circle and policymakers are reluctant to do so, however, because a higher electricity rate will further burden the public, who are struggling due to high inflation.