South Korea's energy minister said Wednesday that the country will have little choice but to raise its electricity rates partly to reflect growing costs, hinting the rate increase will take place next year.
Yoon Sang-jick, minister of trade, industry and energy, said there already exists a need to raise electricity rates by about 2 percent due to a rise in the consumption tax on soft coal, set to go into effect on July 1.
"Once the consumption tax on coal rises, there will be a need to increase electricity rates," he said while meeting with reporters.
Starting from the beginning of next month, the government will impose a consumption tax of between 17 won and 19 won (about $0.02) on each 1 kilogram of soft coal imports used by power companies while lowering the consumption tax on liquefied natural gas from the current 60 won to 42 won per kilogram, according to the ministry.
This will not immediately lead to a price hike.
"The government plans to postpone a rate hike at least until the end of the year as it believes the recent drop in energy prices and the rise in the value of the local currency can cushion the need to increase electricity rates," he said.
Yoon, however, noted the country will have to hike electricity rates next year due to the start of emissions trading, which will limit the amount of greenhouse gas emissions by each firm, including power companies, inevitably driving up their costs.
"A new market for emission rights will certainly emerge as companies will have to reduce their greenhouse gas emissions and those that exceed their emission allowance will be forced to purchase emission rights," the minister said.
"Its impact on the price of electricity will depend on the price of emission rights, but what I want to say is that once the emissions trading is introduced, there will certainly be a need to increase electricity rates," he added.
The minister said there will also be a need to raise electricity rates to help cut greenhouse gas emissions.
"Basically, the price of energy must go up to cut greenhouse gas emissions. Reducing emissions means reducing the use or supply of energy. This can only be achieved by either cutting overall supplies or increasing prices." (Yonhap)