Fixing broken utility billing system

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Fixing broken utility billing system

The government yielded to the boiling public disgruntlement over high electricity bills as the result of the unprecedented ongoing heatwave. It announced a discount on household utility bills from July to September. Each of the six-stages of the progressive system subject to surcharges for power usage will be extended by 50 kilowatts, which could translate into a discount of about 20 percent in three-month household electricity bills. But the public is hardly relieved as the harsh progressive tariff system remains intact.

The mercury is rising higher and higher from global warming. The demand for air-conditioning power will naturally rise. Access to an adequate environment to battle the heat has now become a part of civilian rights. The progressive system that charges greater for more power usage during the peak season that was set during the 1970s has been applied only in the residential sector, giving more freedom for the commercial and industrial fields that use the bulk of power to use as much electricity as they want. Consumers have filed a class-action suit that eventually led the president to order a revision of the system.

The industrial sector fears a possibility of the household burden spilling over to its turf. It is time for the progressive power rate system to be fixed before it builds to a flashpoint.

There are two aspects to address the billing system — one from the cost perspective and the other from social welfare and balanced distribution perspective. The government maintains the progressive rate system to charge heavier on greater use is necessary to prevent excess power use in a resource-poor country and to help the poor.

Since the government nor Korea Electric Power Corp. disclosed the costs, we would have to estimate it from the cost recovery rate that refers to the charge the state utility company earned by adding the optimal cost to expenses from past investments and maintenance. Unless the government reveals how cost is calculated, we cannot know how much the state saves in charging households for power use.

The cost for power supply to industrial sites is unquestionably lower than the supply for consumers. Power demand in industrial sites does not differ greatly by season or days. Factories are run by the minimum-cost generators like nuclear or coal power generators. The fees for distribution are cheaper because power is supplied in high voltage. Power for industrial sites is cheaper in most countries.

But whether the price gap is fair is a different question. Authorities may be right from the energy engineering view, but not so from the economic perspective. The government doesn’t seem to understand air-conditioning is essential to everyday life in extreme heat. It remains in the poor days of 1970s when it was deemed evil for consumers to waste electricity — and jeopardize factories — for the economy’s sake.

But air-conditioners are no longer a luxury. The proliferation rate of air-conditioners is at 80 percent. It is nonsense to ask people to keep the air-conditioner on for just three hours a day in such heat. Considering the demand and the fact that air-conditioning has become indispensable, the current billing system must be moderated to ease the consumer burden.

It is also outdated to claim that the current billing system serves the poor. Even the poor need to use more air-conditioning than before. Without air-conditioning, using TVs and refrigerators is enough to push power beyond the base stage. The billing system that has not kept abreast with the changes in modern family structure and lifestyle to impose surcharges based on electricity use is flawed. A new billing system must be created by reflecting social welfare by including senior citizens and children as the vulnerable class in need of power benefits. Instead of handing out condescending temporary discounts, the government must reform the billing system.

The progressive billing stages should be lowered to three to four from the current six and the maximum tariff be reduced to three times or twice from the current 11.7 times. Authorities also must try to even out the discrepancies in power charges and work on securing long-term stability in the power supply as not to undermine the balance sheet of power suppliers.

The government also should consider scrapping progressive billing or providing subsidies for the poor. We must be cool-headed to solve the heat issue.


Translation by the Korea JoongAng Daily staff.

JoongAng Ilbo, August 13, Page 25


*The author is a professor at Ajou University.

Park Young-gu

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