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A Call for Change
[ Issue 148 Page 8 ] Thursday, November 24, 2016, 05:17:43 Sejoon Huh Assistant Editor sejoonhuh@kaist.ac.kr

     Korea’s summer this year was an excruciating experience. This August hit a record high for the greatest number of heat waves and a record low for amount of precipitation the nation has ever seen. August saw only 76.2 millimeters of rain, which is 28 percent of its average amount of precipitation, and the whole country endured 16.7 consecutive days of heat waves and weeks of above-30-degrees weather before cooler winds from the north came to save it. However, even under these dreadful conditions, the citizens of Korea hesitated to turn on their electric fans and air conditioners in fear of getting “bombed” by an unexpectedly pricey electricity bill.

     This is because Korea currently uses a progressive tax rate for residential electricity usage: cost per kilowatt-hour (kWh) increases exponentially as more electricity is used. The rate uses sectors that correspond to various levels of usage to determine which rate is applied to calculate the bill. The highest sector costs 11.7 times more per kWh than the lowest sector.

     It is easy to see why the public perceives the progressive rate as unaffordable. According to a report by the Ministry of Trade, Industry, and Energy (MOTIE), the electricity bill of a household that spends 53,000 KRW without air conditioning would increase six-fold to approximately 300,000 KRW by turning on its air conditioner for eight hours every day; meanwhile, electricity usage would only increase two-fold from 350 kWh to 700 kWh. The progressive rate also faces criticism for being outdated and not recognizing that electricity usage has increased signifcantly since 40 years ago.

     Moreover, there has been controversy over the differences in electricity prices for non-residential usage and whether those differences are justifed. A recent article by Yonhap News compared two studio apartments, one registered for residential use and the other for commercial, in the same building; despite the fact that the commercial studio apartment used 900 kWh, 200 more than its counterpart, it paid only 140,000 KRW, less than half of what the residential one paid. As seen in this comparison, electricity prices for industrial and commercial usage apply a proportional tax instead of a progressive one, resulting in much cheaper bills. Additionally, the 2015 report on electricity usage by the Organization for Economic Co-operation and Development (OECD) not only shows that residential usage covers a minor percentage of Korea’s total electricity usage while industries use more than half of it, but also that Korea’s average residential usage is signifcantly less than the average of the other OECD countries.

     In an attempt to curb public outcries to lower prices for residential usage and increase prices for everything else, the government increased the limits on each sector’s range by 50 kWh for this July and August; however, this only exacerbated the situation as the public denounced the government for trying to pacify angry citizens with a minor — 50 kWh amounts to less than an hour of air conditioning per day — and temporary fx instead of looking for long-term solutions.

      However, despite all of the complaints, many government offcials have expressed that they disagree with making prices cheaper, claiming that the current rate serves as a deterrent, and that cheaper prices would cause citizens to be more wasteful with their electricity. Representatives from the Federation of Korean Industries (FKI) have also stated that industries have already received multiple tax hikes, and that applying the progressive rate to businesses would damage the economy severely. But these arguments only seem to escalate debates and incite further disapproval from the public. There has even been a lawsuit, representing more than 5,000 plaintiffs, that was recently fled against the Korea Electric Power Corporation (KEPCO) for overcharging.

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