Photographer: Roberto Schmidt/AFP via Getty Images

Some South Korean Households Are Paying More Than Factories For Power

  • S. Korean households face higher power costs amid summer heat
  • Industries get lower per-unit rate under decades-old policy

It’s not the searing heat sweeping across South Korea that’s keeping Park Hana awake at night, but the cost of electricity she’s using to keep cool.

The 31-year-old says she dreads receiving “poktan” utility receipts at her 83-square-meter home in Gyeonggi province, using the local word for bomb, as the air conditioner roars to shield her toddler from one of the worst heat waves in the North Asian nation. Park’s household is among those paying more per unit of power than factories, under a program started during the mid-1970s to encourage then-fledgling industries.

“I can’t turn the air conditioner off because my kid won’t be able to sleep, and I can’t resist it either as my whole body soaks with sweat after walking home from work,” Park said. “One night I had a nightmare about receiving my bill that stated I had to pay 3 million won ($2,700).” While the South Korean government last week temporarily cut household electricity rates amid record demand, Park says that’s an “act to calm down angry citizens.”

This debate over power prices is playing out in different ways across the globe as governments and utilities cope with consumers disgruntled over costs. Britain’s antitrust authority concluded a two-year investigation in June, saying U.K. customers are overpaying energy firms by 1.4 billion pounds a year. In Zambia, the state utility reversed an increase of more than 200 percent in prices after President Edgar Lungu said consumers couldn’t afford it. California is facing shortages amid abnormally high temperatures, with prices rising in July to a near two-year high.

In South Korea, a policy by the state-owned utility that charges residential customers progressively higher rates as usage increases has fueled protests across Asia’s fourth-biggest economy. Industrial users get a flat rate from Korea Electric Power Corp., known as Kepco, and also pay less for their consumption during off-peak hours.

Residential users paid 123.69 won per kilowatt hour for electricity from Kepco last year, higher than 107.41 won by industrial consumers, data from the company’s website show.

For a household that uses 600 kilowatt hours of electricity a month, putting it among the highest-tier users, the bill would work out to be about 191,200 won. That’s about 5 percent of the average monthly disposable income at the nation’s households in the first quarter of 2016, according to government data. After the temporary price cut, the equivalent of only about $30 would be shaved off the expense, Bloomberg calculations based on data from the energy ministry show.

Relatively Cheap

Still, electricity rates in South Korea are among the lowest when compared with other developed economies. Prices in the nation were at 6.68 pence per kilowatt hour over 2015, according to International Energy Agency data on the website of the U.K.’s Department of Energy & Climate Change. Japan paid 14.72 pence and Denmark 22.07 pence while Norway was lower at 6.18 pence, the data show.

“South Korea’s electricity price is still low and it needs to be normalized, therefore a revamped system shouldn’t just lower prices,” said Yun Won Cheol, a professor at the economics and finance division in Hanyang University in Seoul. “The current progressive pricing is too excessive and complicated. It can potentially be adjusted by reducing the number of stages and drag prices down from the top tier and boost prices from the bottom.”

South Korea’s Ministry of Trade, Industry and Energy and the ruling Saenuri party have formed a committee to restructure the nation’s electricity-price system, according to an e-mailed statement on Thursday. A spokesman for Kepco said the utility is following policy set by the government and declined to comment further.

Increasing Heat

Cities spanning South Korea continue to sizzle in the heat. The temperature in Seoul on Aug. 11 hit 95 degrees Fahrenheit (35 degrees Celsius), 7 more than the historical average, data from AccuWeather Inc. show. The southern city of Daegu hit a peak of 99 degrees Fahrenheit last week, 11 above the average, according to the data. The Korea Meteorological Administration expects this year’s summer to be warmer than normal.

Seo Young Weon, meanwhile, is staying away from her 43rd-floor apartment in a bid to reduce her utility bill. “I take my car and try to do things outside like at cafes, restaurants or I go practice golf,” said the 48-year-old homemaker who lives in Cheonan, about an hour’s drive from Seoul. “I try to set the timer on my air conditioner and have a fan on when I go to sleep because if I use it throughout the night, it will insanely raise my bill.”

Before it's here, it's on the Bloomberg Terminal.