Industrial Electricity Rates to Vary by Region, Southern Areas to See Up to 18 Won Reduction

The government is moving forward with a plan to implement differentiated industrial electricity rates based on regional power supply conditions. The aim is to lower electricity rates in non-metropolitan areas, where power generation is abundant, to encourage businesses to invest in these regions and alleviate the concentration of power demand in the metropolitan area.


On August 26, the Ministry of Climate Energy and Environment and Korea Electric Power Corporation held a public hearing at the KEPCO Southern Seoul Headquarters in Yeongdeungpo-gu, Seoul, to unveil the design plan for the 'Industrial Regional Electricity Rate System.'

This regional electricity rate system is based on the 'Special Act on the Activation of Distributed Energy,' which will take effect in June 2024, approximately two years and two months after its enactment. The government has developed a detailed system design plan following expert research, internal reviews, and consultations with industry and experts.

The core of this reform is to introduce regional differences in industrial electricity rates, which have been uniformly applied nationwide. A new 'regional adjustment fee' will be established alongside the current basic and energy charges, allowing for lower electricity rates in areas with abundant power supply.

The government aims to create a 'local production, local consumption' electricity system, where consumption increases in regions that generate power. By lowering electricity rates in regions with relatively high power supply capacity, the government believes it can encourage businesses with high electricity consumption to relocate or invest in production facilities outside the metropolitan area.


The country will be divided into 11 regions based on power system conditions and balanced development factors.

Initially, the country will be categorized into four metropolitan areas: southern metropolitan, northern metropolitan, central, and southern regions, considering power flow, transmission congestion, and consumption structure. The final regions will be determined by combining these four areas with the Ministry of the Interior and Safety's regional preference index and industrial crisis areas, reflecting the economic conditions of each region.

Jeju will be excluded from this system due to its geographical characteristics as an island and its unique power supply conditions.

Regional electricity rates will be calculated based on transmission network usage costs, power self-sufficiency rates, and balanced development factors. The rates will reflect regional transmission costs and self-sufficiency rates, as well as local economic conditions through the regional preference index.

As a result, industrial electricity rates in the southern metropolitan area, where power demand is concentrated, are expected to remain at current levels or be adjusted by around 1 won per kWh. In the northern metropolitan area, which includes Incheon, rates may decrease by about 10 won, while the central region, which includes Gangwon and Chungcheong, could see reductions of about 15 won. The southern region, which has a relatively high concentration of nuclear and renewable energy facilities, is expected to see reductions of up to 18 won.

Considering that the average selling price of industrial electricity was 181.9 won per kWh last year, the maximum reduction in the southern region is projected to be about 10% of the average selling price.


If implemented, the government estimates that the overall industrial electricity costs for businesses will decrease by approximately 2.8 trillion won. However, the actual reduction may vary depending on the final regional classifications and detailed rate calculations.

A key challenge will be how to mitigate KEPCO's financial burden resulting from the significant rate reductions. The government plans to introduce regional pricing in the wholesale electricity market, where power generation companies and KEPCO trade, and to provide financial support to minimize KEPCO's burden.

With the introduction of regional pricing in the wholesale market, there will also be differences in electricity trading prices between the metropolitan and non-metropolitan areas. This aims to provide price signals to power generation companies based on regional power supply conditions, encouraging not only the distribution of power demand but also the dispersion of generation facilities.

The government expects that the regional electricity rate system will serve as a means to promote business relocation and new investments in non-metropolitan areas. In particular, expanding investments in high-energy-consuming advanced industries outside the metropolitan area is anticipated to contribute to job creation and the strengthening of industrial foundations in those regions.

Companies already operating in local areas are also expected to benefit from direct cost savings. If the reduction in electricity rates leads to lower production costs, it could enhance the price competitiveness of export-oriented manufacturing companies.

From a power policy perspective, this is expected to alleviate the burden of constructing large-scale transmission networks needed to send electricity to the metropolitan area. Increasing power consumption in regions with concentrated generation facilities could reduce the demand for long-distance transmission.

The government and KEPCO plan to finalize the detailed design plan after gathering opinions from the industry, power generation companies, local governments, and experts during the public hearing. Following this, they will proceed with related notifications and amendments to electricity rate terms, aiming for implementation within the year.

Minister of Climate Energy and Environment Kim Seong-hwan stated, "The introduction of the industrial regional electricity rate system will attract investments in energy-intensive industries outside the metropolitan area, fundamentally reducing the burden of constructing the national transmission network and enhancing national balanced development and the long-term competitiveness of our industries."