Time for a redesign

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Time for a redesign

The government has decided to ease residential electricity surcharges for the months of July and August to bring down utility bills amid economic downturn for the hottest summer in 111 years. The news is a major relief for consumers fearful of the costs they have incurred for keeping their air conditioners on day and night during the heat wave. But temporary relief cannot go on forever.

Korea’s summer is getting hotter. Air conditioning has become indispensable. According to Statistics Korea, the number of air conditioned homes has gone from 9 percent in 1994 to 78 percent in 2013. The ratio is likely to have topped 80 percent by now.

Enforcing a surcharge rate system on residential electricity that takes up merely 13 percent of the total national consumption is unreasonable given the change in lifestyle. The industrial and commercial sectors, which make up 56 percent and 20 percent of the nation’s annual electricity consumption, are not levied with the surcharge.

The surcharge is levied on households that use beyond a certain amount of electricity to encourage households to save power. Under the six-stage system, the rate from bottom and top widened to as much as 11.7 times. The scale was reduced to three stages from December 2016 to keep the gap within three times. The rate system nevertheless remains controversial.

We must not squander electricity. But with the mercury at a boiling point, saving on air conditioning would hurt public health and reduce productivity. The government takes a short-sighted relief action each summer without seeking a solution.

The government must consider scrapping the residential surcharge and redesigning the utility charge system.

The government is suspected to have been conservative in its estimate on demand to lower the supply ratio in order to support President Moon Jae-in’s pledge to phase out nuclear reactors. Electricity demand will increase, not decrease, on demographic factors as argued by energy authorities because summers will become hotter and winters will get colder due to climate change. Once automation and big-data applications become common in the fourth industrial age, electricity demand will go up even higher. The government’s energy plan, however, remains contained because of its focus on phasing out reactors.

The government must redraw its long-term supply and demand outlook to better reflect changes in the living standards and business environment. The first step is to revisit the reactor phase-out policy. Without a stable power production plan in a country lacking natural energy sources, the country’s economic future as well as individual living standards will be at risk.

JoongAng Ilbo, Aug. 8, Page 30
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