South Korea’s state power utility announced an average electricity price increase of 9.7% for industrial users starting Wednesday, while freezing rates for residential users and commercial facilities such as restaurants. Large-volume industrial users will see a 10.2% increase, while SMEs mostly face a more modest hike of 5.2%. While primarily targeting the few large industrial users that account for more than half of total power consumption, government officials on Wednesday defended the hike by noting that Korea’s electricity rates in general rank low among OECD nations.

The move comes as the Korea Electric Power Corporation (KEPCO) grapples with around $147 billion in debt and around $30 billion in accumulated losses. Its selective increase, which will impact major technology and steel companies more heavily, is expected to generate a moderate level of additional annual revenue for the debt-laden utility.

WHY IT MATTERS

The increase falls well short of addressing KEPCO’s financial health, defying various expert recommendations over the past year which called for steeper hikes across all sectors — including household electricity prices — to help cover the company’s interest payments, which now amount to over $80 million daily.

Despite KEPCO’s financial woes, Wednesday’s announcement of the selective price hike poses significant challenges for major businesses that drive the country’s exports. The top 20 corporate users, which consumed 85,900 GWh last year, are expected to pay additional fees totaling some $870 million annually under the new rates.

The increased power costs will particularly impact semiconductor companies like Samsung Electronics, SK Hynix, and steel manufacturers, who rely heavily on electricity for their operations. The Federation of Korean Industries on Wednesday, while acknowledging the financial difficulties KEPCO faces, argued that the burden will eventually spread beyond large corporations to the broader economy, as companies may need to adjust their pricing to accommodate the higher operational costs, despite the government’s intention to contain inflation through targeted increases.