Friendly Economy: Differential Electricity Rates by Time of Day and Its Practical Challenges

[Anchor]

Joining us for our Thursday segment, Friendly Economy, is reporter Han Jiyeon. Han, there is talk about introducing differential electricity rates based on the time of day, right?

[Reporter]

Yes, but it seems difficult to implement immediately.

To charge electricity rates based on the time of day, you need what is called a smart meter. However, the installation rate in apartment complexes remains at the 14 percent level this year.

President Lee Jae-myung stated at the National Fiscal Strategy Meeting on the 13th that the system should be changed to charge lower rates when power is abundant and higher rates during peak hours.

Currently, residential electricity rates are the same regardless of whether it is day or night, and the proposal is to revise this.

In fact, this method has been applied to industrial electricity for a long time. In April, the time intervals themselves were revised.

The intention is to distribute power consumption by charging lower rates during the day when electricity is abundant and higher rates during the evening when demand surges. If you look at this graph, you can see why this discussion has extended to residential electricity.

Since 2019, residential rates were slightly higher than industrial rates for a while, but now it has completely reversed; industrial rates are about 180 won per kilowatt-hour, while residential rates are around 158 won.

As the burden on companies increases, there is a push to also address residential rates.

However, there is an issue of equity. Households that can charge electric vehicles or run appliances during the day can save on costs, but dual-income households that have no choice but to use electricity in the evening after work could face a heavier burden.

A bigger problem is the meters I mentioned earlier.

Half of all households in Korea live in apartments, and most of these complexes have a single contract with KEPCO, which means there is no structure to track when each individual household uses electricity.

Installing new meters costs about 200,000 won per household, and it would require nearly 2 trillion won to supply them to the 11 million households that do not have them yet.

Considering that it took three years to install them in 2 million households in 2020, it is expected to take a significant amount of time to reach the entire country.

[Anchor]

I suppose these discussions are happening because energy prices are rising?

[Reporter]

If we look at how electricity rates are determined, both oil and gas prices are rising, which is increasing the pressure for price hikes.

The government is struggling with the decision to maintain residential electricity rates, which have been frozen for over three years since 2023.

As the situation in the Middle East becomes unstable again, the price of liquefied natural gas (LNG), which Korea uses heavily for power generation, is rising. This means there is pressure on the cost of power generation itself.

The government is in a situation where raising residential rates immediately would affect inflation, but keeping them frozen increases the burden on companies, affecting industrial competitiveness.

This is why energy voucher support has been proposed. There are voices suggesting that support for low-income families should be expanded, while the increased costs for other households should be reflected in electricity rates in stages.

The budget for these vouchers is currently between 800 billion won and 1 trillion won per year, and there is talk that this scale needs to be increased.

[Anchor]

Lastly, let's look at the results of a survey by the Korea Consumer Agency.

[Reporter]

We are seeing a situation where additional costs are piling up after calling for cleaning and plumbing services.

In the first quarter of this year alone, complaints related to demands for additional costs were more than three times higher than last year.

The Korea Consumer Agency analyzed about 1,200 applications for damage relief regarding cleaning and sewage services received over the past three years.

Among them, 292 cases, or one in four, involved sudden demands for additional costs on-site.

In most cases, consumers signed a contract based on prices seen over the phone or online, only to be asked for more money on the day of the work, citing reasons such as "the house is too dirty" or "the plumbing structure is unusual."

In many cases, if the consumer refused, the service provider would not perform the work at all or refuse to return the deposit.

This was particularly prominent in "drain unclogging services."

Companies would write "Toilet unclogging, 50,000 won base price" on their websites, but on-site, they would demand hundreds of thousands of won more, claiming that "the toilet must be dismantled" or "special equipment must be used."

Since the demand is made when the toilet is already disassembled or the pipes are open, it is an awkward situation for consumers to refuse.

The Korea Consumer Agency advised consumers not to sign contracts immediately over the phone or online, but to get an on-site estimate first.

They also explained that it is a good idea to confirm the reasons for and the amount of any additional costs before signing a contract, and to take photos before and after the work to prepare for any potential disputes.

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