South Korea will raise electricity prices by an average 4.9 percent from next week to help the state-run power supplier cut losses, far less than what the company had originally sought.
The increase, the first since early December last year and due to take effect from August 6, is expected to lift the average annual consumer inflation rate by 0.056 percentage point, the Ministry of Knowledge Economy said in a statement.
South Korean inflation stood at a more than 12-year low of 1.5 percent year-on-year in July, far below the bottom of the central bank’s target range of 2 percent to 4 percent.
With inflationary pressures easing, the central bank is widely expected to cut interest rates next week for the second time in as many months to help spur activity as the export-reliant economy reels from the effects of the euro zone crisis.
Korea Electric Power Corp (KEPCO), which had initially sought a 13.1 percent hike in power tariffs, has been tipped by analysts to suffer another annual operating loss after losing 2.99 trillion won ($2.64 billion) last year.
The ministry said the rate of increase has been decided after considering the currently difficult economic conditions facing electricity consumers and the losses at KEPCO.
Electricity prices will be raised by 6 percent for industrial users, 2.7 percent for households and 3.0 percent for educational facilities, respectively, it added. ($1 = 1131.7500 Korean won)