Energy policy fix

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Energy policy fix


The National Assembly didn’t pass a supplementary budget bill to compensate losses from state firms, the Korea Electric Power Corporation and the Korea Gas Corporation.

The ruling party’s incompetence to govern state matters and the opposition party’s stubbornness are the probable reasons for the failure. But if we look deeper, we can see it was the result of a contradiction between a energy price policy and a consumer price policy.

The government fixed electricity and gas prices in the first half of the year in an attempt to control consumer prices and the burden was passed down to the two state corporations.

The government promised to make up for 1 trillion won ($900 million), which is 50 percent of fuel costs, of the deficit that the two companies saw in the first half of the year. That is, it would compensate for increases in gas and electricity bills with taxpayers’ money. The government chose to control consumer prices using taxpayers’ money instead of allowing prices to go up.

The opposition Democratic Party opposed the bill and so it was not passed. If the government can’t make up for losses, the only possible way is to allow the two companies to significantly increase gas and electricity prices.

It is easy to expect consumer prices to soar after the Chuseok holiday. Gas and electricity costs take up a large part of people’s consumption, which will affect production costs for industries that use both resources.

The government fixed gas and electricity prices in the name of curbing increases in consumer prices, but, ironically, it has become the main reason for increasing prices in the second half of the year.

We believe that the energy price policy should be thoroughly changed. Energy doesn’t come for free and state utility companies are not charitable bodies. Therefore, energy prices should be set at a reasonable level, reflecting original prices.

Fixing energy prices in the name of controlling consumer prices sends a wrong message to energy consumers, preventing them from saving energy and distorting the distribution of resources.

Besides, a trick to make up for the increase in energy prices with taxpayers’ money is an unfair method because it passes the burden from consumers who use a lot of energy down to people who use only a little.

The best energy policy is to separate energy prices from a consumer price policy and leave them to market principles.



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