President Yoon Suk Yeol said Wednesday the government would freeze the price of public utilities, at least for the first half of the year, in a bid to ease the growing financial burden on the public following outcry over soaring heating bills and high inflation.
At a meeting of economic ministers, Yoon requested the central government freeze public utility bills -- road, railroad and postal fees -- for the first half of this year. He also asked provincial governments to cooperate in stabilizing utility fees.
Yoon said the government would control the scope and speed of hikes in electricity, gas and other energy fees to soften the burden on people, while extending more support to vulnerable groups.
During the meeting, Yoon revealed his intention to reconfigure the way companies in two private-sector industries garner profits. Noting that telecom and financial sectors have the characteristics of a public good, Yoon ordered officials to draw up a practical competition system to reduce side effects of their oligopoly based on government-issued licenses.
With a new set of plans, Yoon aims to stabilize the prices of four major fields, namely public utility, energy, telecom and financial costs. But Yoon’s plan comes after he faced great pressure following a storm of complaints from people shocked by the soaring energy bills of the past two months. In addition, other public utility fees, such as bus and subway fares, were scheduled to be raised in a way that could extend the period of high inflation and worsen conditions for ordinary people.
But it is questionable whether Yoon’s new scheme would prove as effective as he expects. Most, if not all of his plans to freeze public utility fees are temporary. The Seoul Metropolitan Government, for instance, said it would delay fare hikes for bus and subway services from April to the second half of this year. This means a delay of fee hikes for perhaps just a few months -- not a fundamental solution to mounting operational deficits for the city’s transport services.
Asking the state-run Korea Electric Power Corp. and Korea Gas Corp. to slow the pace of fee hikes may also offer only a temporary reprieve. Capping electricity and gas prices would certainly make bills more affordable, but would do little to depress demand from households and companies at a time when an energy saving campaign is much needed.
Although people have complained strongly about high energy bills over the winter, there were no signs of slowing demand for energy. In the first 10 days of February, imports of oil and gas jumped 44.9 percent and 86.6 percent, respectively, from a year before. The recent high energy bills resulted from a series of fee hikes last year, but data shows that many people and companies are yet to become serious about reducing energy use.
With international energy prices still at a high level, the freeze of fee rates would force Kepco and Kogas to take on more of the burden, which will eventually translate into bigger and more shocking bills in the future.
Some experts claim the problems with public utility bills trace back to the previous administration under President Moon Jae-in, who firmly kept utility prices unchanged and pushed to phase out nuclear power plants in what critics labeled “populist policy.”
If Yoon keeps using delay tactics and fails to come up with viable solutions to stem utility costs from rising further, he will follow the same populist path of Moon, resulting in greater losses for state-run companies.
There are also critical problems with the burden-sharing plans that telecom and financial companies unveiled in response to Yoon’s announcement. The country’s three major mobile carriers said Wednesday they would offer free additional mobile data to customers in March. But this is limited only to March, and additional free data will not be so effective given that most people are stuck with expensive mobile plans that offer far more data than they actually use each month anyway.
The response from major commercial banks has been equally ineffective.
Shortly after Yoon’s announcement, the Korea Federation of Banks said it would promote a “bank social contribution project” potentially worth more than 10 trillion won ($7.8 billion) over three years, but experts say that cutting interest rates for loans would be far more effective.
With economic and political factors mired in uncertainty, it is anybody’s guess whether the government will be able to allow public utility fees to be raised in the second half of the year. If Yoon opts to depend on such delay tactics, the future burden will become unbearable.