SK Chief Chey Urges Opposition Leader to Speed Up Regional Electricity Pricing
The Korea Chamber of Commerce and Industry (KCCI) has asked the leadership of the Democratic Party of Korea to accelerate the introduction of a regional electricity pricing system.
While the Special Act on Distributed Energy Activation passed the National Assembly, providing the legal basis for the differential pricing system, implementation has been delayed due to conflicting interests among businesses, local governments, and consumers.
KCCI held a policy meeting with Democratic Party leaders including Chairman Chung Chung-rae at the Chamber Lounge in Jung-gu, Seoul, on Thursday. KCCI Chairman Chey Tae-won and other executives proposed the regional electricity pricing system, and the Democratic Party promised to actively review the proposal.
"Electricity costs are a challenge for businesses operating in regional areas," Democratic Party spokesperson Kwon Hyang-yeop said at a briefing after the meeting. "There were requests to differentiate electricity rates for companies that relocated from the Seoul metropolitan area to ease the capital region's power grid congestion."
Kwon added that an external research study is currently underway and the party will actively review the proposal once the study is completed.
The regional electricity pricing system charges different rates based on the distance between power generation sites and consumption areas. Regions closer to power plants would receive discounted rates, while areas like Seoul and the metropolitan region—which consume large amounts of electricity but lack power plants—would pay higher rates reflecting transmission costs.
Electricity is primarily generated in provincial areas while consumption is concentrated in the capital region, creating regional inequality. The differential pricing system was proposed to address massive transmission costs, opposition from communities where transmission lines pass through, and to encourage balanced national development by incentivizing production facilities in areas with cheaper electricity.
The National Assembly enacted the Special Act on Distributed Energy Activation in 2023 as the legal foundation for regional electricity pricing, which took effect in June last year. However, detailed regulations on how to designate regional zones and the extent of price differentiation remain incomplete.
The differential pricing system involves two components: wholesale rates at which power plants sell electricity to Korea Electric Power Corporation (KEPCO), and retail rates applied to businesses and consumers. For regions with many power plants, the likely approach is to lower wholesale prices from generators while raising retail electricity rates for metropolitan area homes and factories.
However, discussions have stalled amid opposition from private power plants in non-metropolitan areas that would have to lower wholesale prices, as well as complaints from businesses and residents in the capital region facing higher electricity costs.
"Transmission costs are higher in the metropolitan area, but distribution costs are actually lower there due to the concentration of homes and production facilities," an industry official said. "There are many factors to consider, and that's why no conclusion has been reached. The message to the ruling party is to speed things up."
At the meeting, participants also discussed the K-Steel Act, which passed the National Assembly plenary session late last month, and requested support for low-carbon steel special zones.
"Steel industry regions like Pohang and Gwangyang are struggling with carbon neutrality issues," Kwon said. "The request is to designate these industrial complexes as special zones to accelerate low-carbon industry."
The business community also called for production tax credits to strengthen competitiveness of renewable energy including solar power, and passage of the Renewable Energy Self-Sufficient City Special Act, Kwon added.
"Regional development is something we cannot give up, which is why the government has pursued various policies," Chairman Chey said. "Even if fundamental problems aren't solved, continuous efforts are being made. A solution won't come all at once, but I believe positive measures can be found if we continue dialogue and discussion from today."
Chairman Chung responded: "Amid the crisis of regional decline and population decrease, where companies build factories and operate is a critically important matter for balanced national development. I hope we can put our heads together to create conditions for balanced development."