Ministries squabble over utility fee increases

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Ministries squabble over utility fee increases

Amid growing public displeasure over rocketing utility fees, the government hinted that it will stem an increase in public utility fees by lowering the base prices.

But the public-funded energy companies and the Ministry of Trade, Industry and Energy, which oversees them, are digging in, saying there is “no bubble” in the computation of the base prices.

In a New Year meeting with reporters on Thursday, Finance Minister Hyun Oh-seok said he will look into whether the base prices of public utility services have been set at proper levels.

The fees of three major utility services - electricity, gas and water - have risen 15 percent cumulatively on average since 2011. The Korea Electric Power Corporation and the Korea Gas Corporation recently raised average electricity and gas fees by 5.4 percent and 5.8 percent, respectively.

The rise has drawn criticism from civic groups who said energy companies are making the public pay for their inefficient management.

“Basically, the base prices of public utility fees could be higher now than they should be,” said Hyun. “We have allowed them [Kepco and Kogas] to raise prices this time, but from next time, we will ask whether they set the resource price and labor cost at the proper levels.”

For electricity, the biggest chunk of the base price is the resource cost, which is what Kepco pays its affiliates or private electricity-generating companies for power.

The resource cost makes up about 86 percent of the base price of electricity fees. The balance is management fees, including the management of sales (2.2 percent) and labor cost (1.9 percent).

The structure is similar for the base price of gas - 89.1 percent is the cost of purchasing gas, mostly from abroad.

The Ministry of Strategy and Finance is planning to commission a third-party institute to analyze the base prices of electricity and gas fees, according to its officials.

But the Energy ministry doesn’t go along with that idea.

“The resource prices are set by the sellers, so it is difficult for Kepco or Kogas to reduce resource fees,” an official of the Energy Ministry.

As for labor cost, the Finance Ministry claims they can be lowered by reducing salaries at the energy companies. The companies say that would barely have an impact because they make up only 1 percent of the base prices.

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