Gov't to double subsidies for vulnerable households as energy bills soar

An apartment complex janitor in Seoul looks at gas bills delivered to mail boxes on Wednesday. Yonhap

Soaring utility fees trigger blame game in National Assembly

By Nam Hyun-woo

The government will increase energy vouchers and gas price discounts for economically vulnerable families, in order to alleviate their economic burdens amid soaring utility fees.

Choi Sang-mok, a senior presidential secretary for economic affairs, said in a press conference on Thursday that the government will temporarily double the amount of energy vouchers granted for 1.71 million vulnerable households from current 152,000 won ($123.42) to 304,000 won per home this winter.

Also, state-run Korea Gas Corp. (KOGAS) will double the range of gas bill discounts for 1.6 million households from 36,000 won to 72,000 won.

The energy vouchers are a government subsidy program for vulnerable households. As of last year, eligible families could receive vouchers worth up to 385,300 won per year and use them in paying utility fees such as electricity and gas bills.

"Since the war in Ukraine started, the international gas prices have skyrocketed, and each country has been making efforts to raise their gas rates to a realistic level, but our response was not timely," Choi said. "Due to this, the government concluded it inevitable to make gas rate hikes, and reflected this in last year's gas rates."

Choi added that the government will freeze the gas rates for the first quarter of this year to reduce households' burden, given the rising demand for heating in the winter season.

Choi's announcement came as the country's gas rates are showing a steep rise, triggering a public outcry and furious debate.

According to the Korea City Gas Association, the average retail gas price of Seoul in January stood at 19.69 won per mega-joule, up 38.4 percent from a year earlier.

This is attributable to the four rounds of wholesale price hikes for homes by KOGAS in April, May, July and October, totaling to a 42.3 percent increase during the past year. KOGAS increased its wholesale price due to the skyrocketing liquefied natural gas (LNG) prices stemming from the Russian invasion of Ukraine.

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This resulted in a greater repercussions for those using gas heating systems more frequently in the winter, with some people arguing that their gas bills in December have more than doubled from a year ago.

Senior presidential secretary for economic affairs, Choi Sang-mok, enters the briefing room at the presidential office in Yongsan District, Seoul, Thursday. Joint Press Corps

The rising gas rates have become a political blame game for rival parties in the parliament.

"It was easily predictable that this situation could happen due to the war (in Ukraine) and the economic headwinds," main opposition Democratic Party of Korea (DPK) Chairman Lee Jae-myung said during a party meeting, Thursday.

"The current administration has failed to prepare counter measures, just blaming others for the problems, which is undesirable," Lee said, referring to the ruling People Power Party's (PPP) criticism that the gas bills rose sharply because the previous populist Moon Jae-in administration did not raise the gas prices enough to curry favor with the public.

Lee proposed the government hand out 7.5 trillion won in subsidies to help the public, by imposing additional tax, dubbed "windfall tax," to energy companies which enjoyed benefits from the current price upcycle.

PPP floor leader Joo Ho-young said in a party meeting Thursday, "The Moon administration's energy populism has become a bomb, and the current government and the public are suffering from it."

"The Moon government has frozen the gas prices for a year and a half before the (March 2022) presidential election, and only inched the prices up 12 percent after the election," Joo continued. "The cost (of importing LNG) has increased more than 10-fold, but the (Moon government) did not raise the supply price, resulting in a 9 trillion won ($7.3 billion) negative margin between the cost price and the supply price.

Against this backdrop, the government's prompt decision to expand energy vouchers seems to be in line with not only its efforts to address the actual economic pressure on the public, but also a political consideration that the public woes over gas bills and other rising utility costs may aggravate the sentiment against the ruling bloc.

State-run power distributor Korea Electric Power Corp. (KEPCO) raised the electricity price by 9.5 percent on Jan. 1, marking the sharpest hike since 1981, when Korea was suffering from the aftermath of the oil shock in the late 1970s.

Also, it remains uncertain whether the freeze in gas rates for the first quarter of this year will continue in the next quarter.

"It is too early to tell about the second quarter," Choi said. "We will make decision based on analysis on the economic pressure on the public and the financial structures of KEPCO or KOGAS."

Adding to this, the Seoul Metropolitan Government is also considering a 300-to-400 won hike in subway and bus fares. It has already decided to increase the base fare of taxis in Seoul by 1,000.

"In a political perspective, the cost of living is a critical factor for the ruling party and the government because complaints and angers are bound to target the ruling administration regardless of its cause," an official at the ruling bloc said.

"It is somewhat inevitable for the government to raise energy prices to a realistic level amid external difficulties," Choi said. "The government will spare no efforts in its policies in order to minimize the pressure put on the public."