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South Korea Increases Power Prices Second Time to Curb Demand

Jan. 9 (Bloomberg) -- South Korea will raise electricity prices by an average 4 percent starting next week, the second increase in five months, seeking to curb rising power demand.

Tariffs will rise 4.4 percent for industrial plants and buildings, 2 percent for households and 3 percent for farms from Jan. 14, the Knowledge Economy Ministry said today in an e-mailed statement. The cost for education facilities will be 3.5 percent higher.

The adjustment, after a 4.9 percent increase on Aug. 6, may help rein demand for electricity as the government asks large consumers to alter working hours amid tight power supply, the ministry said. South Korea’s power consumption surged to a record on Jan. 3 and reduced the country’s capacity reserve buffer below the 10 percent minimum.

Korea Electric Power Corp., the state-controlled monopoly distributor known as Kepco, advanced 2.6 percent to 31,650 won in Seoul trading today before the minstry’s statement. That’s the highest since Oct. 11, 2010.

Kepco had posted four straight annual losses as government controls on prices to curb inflation prevented it from passing on higher costs to users. The utility purchased power at 103 won (10 cents) a kilowatt hour and sold it at 94 won in the first half of 2012, the company said in a statement on July 27.

The higher tariffs would add 0.105 percentage point a year to the producer price index and boost costs by 0.05 percentage point for manufacturers, the ministry said.

To contact the reporter on this story: Sangim Han in Seoul at sihan@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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