Government Considering Utility Bill Caps

The Korean government is considering imposing a cap on utility bills as early as next year.

The measure aims to increase efficiency in public company management and to stabilize utility bills as the measure would prevent service providers from passing their cost increases on to customers.

The Ministry of Finance and Economy (MOFE) submitted a report entitled ‘Research on introducing incentives in setting utility prices’ to Lee Sang-gyeong, a lawmaker working in the finance and economic committee. The report was commissioned by the MOFE to the Korea Association on Telecommunication Policies (KATP) and was submitted last month.

The report categorized Korea’s 45 utilities into three groups: telecommunications, electricity and gas; railroads, water, and sewage; and all the rest. Each group is expected to get a different cap on prices. The upper limit measure is expected to be adopted gradually.

The measure is being considered to encourage state-run companies to make their management more efficient.

Currently, all the costs incurred by a utility can be directly transferred to customers.

That is why public companies are being blamed for lax management, as they are not under any pressure to cut costs or improve their service quality.

As an initial step, the government plans to introduce a cap on the telecommunications, electricity, and gas industries. The former has been completely privatized, and the latter two have been listed on stock market. All are pursuing profits.

As a second step, the government is planning to come up with management-improving plans in the railroad, water supply, and sewage industries as they are struggling with continuing deficits. Then a cap will be adopted, leading to higher prices for train tickets and water.

An official from MOFE said, “Through consultation with relevant ministries based on the report, detailed action plans will be made public within this year.”

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