Freeze household electricity bills due to 'common people's burden'...Only for industrial use.

■ Host: Anchor Jeong Jin-hyung and anchor Lee Eun-sol
■ Starring: Lee In-cheol, Director of Economic Research Institute,

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information. Please specify [YTN New Square 8PM] when quoting.

[Anchor]
Korea Electric Power Corp. and the government, which have been considering raising electricity rates, have decided to raise only industrial electricity rates in consideration of the burden on ordinary people. In addition, as the oil tax cut has decreased, gasoline prices will rise by 42 won per liter from next month. Other economic news, Lee In-cheol, the head of the Economic Research Institute, will be referred to today. Please come in. First, let's talk about electricity bills. It was announced today. Housing use will be frozen, and industrial use will increase by 9.7%, or nearly 10%, starting tomorrow. What kind of background is this?

[Lee In-cheol]
That's right. It was probably the beginning of the administration. It jumped about 50% due to five or six increases in electricity rates and household electricity rates. There was a talk about the electricity bill bomb. However, household electricity bills have been frozen for a year and five months since they increased by 8 won per kilowatt in May last year. This time, it starts tomorrow right away. From the 24th, we will only raise electricity rates for industrial use. The purpose is this. The government explains that it reflects the accumulated increase factors, but comprehensively considers the burden on the low-income economy. As a result of
, the increase in electricity rates for industries has increased. It's a whopping 9.7%. It is recording the largest increase ever, and industrial electricity rates increased by 6.9% in November last year. Even at that time, electricity bills for households and small businesses were frozen. So you'll say that it's good now that home electricity rates have been frozen, but in fact, gas rates have already gone up last August. Household gas bills have risen 6.8% since August, but we can only feel gas if we heat it.

[Anchor]
You don't use it often in August.

[Lee In-cheol]
is correct. So, from the bill in October or November, when the cold wind starts to blow, it may come as a heating cost bomb.

[Anchor]
You said it was the largest increase ever, but I heard that industrial electricity rates are also applied differently to large companies and small and medium-sized companies.

[Lee In-cheol]
is correct. Now, we are going to differentiate the impressions between large companies and small and medium-sized companies. Since large companies have a trickle-down effect on exports, they are going to raise it a little more and small and medium-sized companies will raise it slightly, but there are industries that use a lot of electricity. The semiconductor industry, the steel industry, and the oil refining and chemical industry use a lot of electricity. In the case of these big companies, the increase is 10.2%. It's the biggest increase ever. And small and medium-sized enterprises, which were frozen in November last year, were also included this time. 5. It will increase by 2%. However, the problem is that when we look at the total demand for electricity in Korea, there are about 440,000 industrial customers and only 1.7% of all customers. By the way, how much of the total electricity is being used? 53% and more than half of them are used by companies. As a result, this industrial electricity rate hike alone has the effect of raising the total electricity rate by 5%, and you will wonder how effective this 5% increase will be. KEPCO expects the increase in profits to increase by about 4.7 trillion won per year.

[Anchor]
You summarized at the end that you expected an additional 4.7 trillion won in profits, but in fact, KEPCO has been in a situation where the deficit continues to grow. But can this increase stabilize management?

[Lee In-cheol]
The problem is that it's new blood. It means that it's only a hemostasis. Although KEPCO is steadily raising electricity bills now, it still has a lot of accumulated debt as it sells them below cost. By the first half of this year, the total amount is almost 203 trillion won. In order to cover 203 trillion won in debt, interest alone is 2.3 trillion won in the first half of this year. It is 2.3 trillion won in interest alone, and it is going out with an average of 12.2 billion won per day.

[Anchor]
Then, won't the 4.7 trillion won you mentioned earlier end if you pay interest twice?

[Lee In-cheol]
is correct. In other words, it is 2.3 trillion won in the first half of the year, so it only pays interest this year, not to mention the principal. Ultimately, an increase in electricity rates is inevitable to address KEPCO's accumulated deficit. Since KEPCO is the only state-run company with more than 200 trillion won in debt, it is probably only a matter of time unless it is resolved, it is only a matter of choice, and will we really be able to afford the electricity bills spent by the current generation? Or it's a question of whether to pass on what we wrote to future generations as a burden. So since KEPCO, a public corporation, is in the red, it has to be filled with taxes in the end, so I think if this price is very stable, electricity rates will inevitably rise sequentially soon.

[Anchor]
It seems that a step-by-step plan is needed. In fact, there are concerns and opposition that business activities will shrink as companies decide to raise only industrial electricity rates.

[Lee In-cheol]
is correct. Today, the Korea Chamber of Commerce and Industry and the Federation of Korean Industries spoke out in unison. It's really a burden on business activities. At the same time, they are asking us to consider cost sharing, energy efficiency, and plans together. Anyway, the increase in electricity rates is expected to increase the burden of 1.27 trillion won per year on electricity bills for the top 20 exporters. Didn't I tell you earlier that semiconductors, steel, oil refining, and chemicals are the industries that use a lot of electricity? Samsung Electronics ranks first in domestic electricity prices and pays the most. This measure could put an annual burden of more than 300 billion won and increase the burden of more than 100 billion won when SK Hynix uses the second most electricity. As a result, it is inevitable to point out that KEPCO's debt cancellation should be passed on to large companies. Even so, the economy is slowing down and the cost burden has increased due to the three high prices, high interest rates, and high exchange rates, but what does the government say about this? Although industrial electricity rates have increased, industrial electricity rates are ranked 26th among 35 OECD countries. They're still saying that it's relatively less burdensome, but what's the worry? It's a relief that household electricity bills are frozen, but isn't it passed on to consumers if industrial electricity bills are raised? From the perspective of companies, there is a cost burden and it is reflected in the product. In the end, it has no choice but to be passed on to consumers. Anyway, the government says that the increase in industrial electricity rates is unlikely to be reflected in consumer prices, but this is the government's wish, and companies do not resolve the cost part on their own. It's quite likely that the quality will deteriorate or it will be passed on.

[Anchor]
Both households and businesses are currently burdened with electricity bills, but I think I'm more worried about the fact that KEPCO still seems to have a long way to go. Let's move on to the next topic, oil tax. The oil tax cut was originally scheduled to be closed at the end of this month, but I heard it will be extended a little.

[Lee In-cheol]
is correct. First of all, the oil tax cut will be extended until the end of the year, but the cut will be reduced. So, it's better to put gas or oil in before the next month passes within this month, but in this case, the oil tax cut rate will remain at 15% from 20 for gasoline from next month. For diesel and LPG gas, it will be reduced from 30% to 23%. International oil prices have probably been extended 11 times since November 2021, when they exceeded $80 per barrel. The oil tax cut has been gradually extended for three years, making this the 12th additional extension. The government made this decision in consideration of the recent international oil price trends, inflation trends, and the impact on tax revenue, but I actually wanted to get rid of it. I wanted to abolish the oil tax cut, but now, with a serious tax deficit, transportation, energy, and eco-friendly tax revenues are collected more than 4 trillion won less than expected this year. As a result, consumers are not feeling much of the oil tax cut that has been going on for three years, but the government is also considering gradually reducing the cut rate or abolishing it altogether as the fiscal burden could increase.

[Anchor]
How much burden is it when we decided to extend the oil tax cut for two months but reduce the cut?

[Lee In-cheol]
Last week, gasoline prices across the country reversed their rise for the first time in 12 weeks on a weekly basis. with the outbreak of the Middle East risk But now the tax discount has also decreased. As a result, gas prices are only going to go up, but starting next month, gasoline will go up 42 won per liter. And in the case of cases, it will go up 41 won, LPG and butane gas will go up 14 won, but when I looked at the Korea National Oil Corporation's oil price information system, the average sales price of gasoline nationwide as of 4 o'clock today is 1593 won per liter and 1,662 won in Seoul. However, as gasoline rises by 42 won, the front seats in the Seoul area will change from next month, so it's inevitably burdensome because it has no choice but to go up to 1,700 won. In particular, if the oil tax cut is reduced in this way, oil prices actually have a big impact on consumer prices. Last month, we had a consumer price index of 1. It was the lowest increase in three and a half years at 6%, but it is the oil prices such as international oil prices that bring down oil prices and consumer prices. Considering that oil prices have now brought down 0.32 percentage points of total prices, oil taxes have slowed, and oil tax cuts have been slightly reduced. Then, prices may see 2% again this month, starting in November.

[Anchor]
In fact, the oil tax was cut during the COVID-19 pandemic and has been continuing until now, so what do you think about the possibility of it being extended again in two months?

[Lee In-cheol]
First of all, the most important thing is whether the Middle East war will spread. Does Israel really catch fire as it attacks Iran's oil facilities? International oil prices, which remained in the $60-per-barrel range, were close to $70-$80 as the conflict between Iran and Israel intensified. In that situation, it is now a little down again, but if the Middle East war does not spread, in fact, the global economy in terms of supply and demand does not increase international demand for crude oil, so we should probably keep a close eye on the risks in the Middle East.

[Anchor]
As the cold wind blows, the kimchi-making season is approaching in earnest, and everyone who has a lot of vegetable prices knows it, but isn't it continuing its high march? So the government will increase contract cultivation and provide discount support. You've come up with these measures, do you think they'll actually work?

[Lee In-cheol]
is correct. I've been worried about our cabbage since Chuseok. I was worried about gold apples, but now I moved on from fruits to vegetables, and after that, I imported Chinese products until last month. At the same time, we released a restaurant company and a kimchi exporter. Still, it's not stable right now. As a result, the government and the government announced measures to stabilize the supply and demand of kimchi ingredients today, and there are two main contents. First of all, we will increase the contract cultivation volume by more than 10%. And we will provide discounts of up to 40 to 50% of agricultural and livestock products. First of all, we will significantly increase the contract cultivation volume of cabbage, but the government will always stock 1,000 tons and supply them flexibly according to market conditions. In addition, the volume of radish cultivation contracts will be expanded by about 14% from last year. And I'm nervous about the seasoning. In any case, in the case of agricultural and fishery products, up to 40% discount is provided to 18,000 places nationwide, including large discount stores, small and medium-sized marts, and traditional markets, and in the case of marine products, it is the main ingredient of kimjang through Korea Fisheries Festa. Seafood products such as sea salt, salted fish, and oysters will be sold at a discount of up to 50%. Since it means that it will be reduced by 50%, it is possible to infer how much the price has risen.

[Anchor]
First of all, I think I'll make kimchi to my heart's content.

[Lee In-cheol]
Rather than making kimchi, I think demand will be concentrated on packaged kimchi. Because there are about two weeks left before the full-fledged kimchi-making season. However, the government's position was that it was a heatwave until mid-September when we saw the weather on the Korean Peninsula. However, the period of cabbage cultivation takes about 60 to 70 days, two months from sowing to harvesting. So, sowing after mid-September can be harvested after mid-November, so the weather has been a little cooler since then. As a result, the government believes that if autumn cabbage shipments begin in earnest, the supply will stabilize after November, but the problem was that a cabbage was probably over 9,000 won last weekend when consumers went. I did put it down a little bit. I think it fell to around 8,800 won between yesterday and today, but I can't feel it. But ultimately, the problem is that the cultivation area of cabbage is gradually decreasing. Because this year, we are experiencing a very golden cabbage wave, but if you look back a few years, I've often told you that the cabbage was left and ground. So, not only is it very sensitive to the climate, but it is also difficult to predict and demand for crop conditions for volatility, so the weather is bound to become more extreme on a regular basis, and if the cultivation area decreases, there is a possibility that we will also experience repeated cabbage waves.

[Anchor]
Finally, let's look at the exchange rate. The possibility of Republican candidate Trump's re-election in the U.S. presidential election has been highlighted, leading to a strong dollar phenomenon. Please point out the exchange rate flow from now on.

[Lee In-cheol]
is correct. As former President Trump's approval rating suddenly rises in the U.S. presidential election, Trump trade and Trump-themed stocks are on the rise in the asset market. The most representative is the dollar. Dollar, bonds, gold, and coin prices are soaring. Today, Deputy Prime Minister for Economy Choi Sang-mok said something very meaningful about the exchange rate. The won-dollar exchange rate of 1,400 won is the new normal. It's a new standard. If we pay 1,400 won, the IMF, I think of a very painful trauma. This is the point that emphasizes that the difference in interest rates between Korea and the United States has created the current exchange rate level and that this trend will inevitably continue for the time being. So the dollar is actually super strong. The won-dollar exchange rate rose again in the Seoul foreign exchange market today. Compared to yesterday, it rose 2.1 won to close at 1382.2 won, the highest since July 30. The recent U.S. economic indicators are also solid. On top of that, there is an expectation that if the U.S. economic indicators are good, the Fed's rate cut will start to speed up. In particular, the recent strong dollar phenomenon is that if former President Trump is elected, the value of the dollar could be higher if the government cuts and tax cuts policies are implemented with its own priority policy. In fact, the dollar index, which represents the value of the dollar against the currencies of the six major countries, moved around 100 at the end of last month, but exceeded 104 today. So, the growing geopolitical unrest in the Middle East is also fueling the strengthening of the dollar, which is a safe asset. When the dollar strengthens and the won weakens like this, exporters are good. Exporting companies have good price competitiveness, but the problem is that they have to bring in import prices. Because I have to pay dollars to buy it. As the won's value declines, it is necessary to import dollars, which could stimulate domestic prices.

[Anchor]
I see. Various Economic News References Lee In-cheol pointed out with the head of the Economic Research Institute. Thank you for talking today.