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Major South Korean businesses found stealing electricity

December 2013

Some of South Korea’s leading businesses have been caught stealing cheap electricity to power research facilities, offices, and golf courses.

 The violations took advantage of differences in electricity rates. In 2012, prices were KRW 112.5/kwh at regular rates, KRW 92.8/kwh at industrial rates, KRW 108.8/kwh at educational rates, and KRW 42.9/kwh at agricultural rates. This year 208 rate violations were detected by August.

 The Samsung Group had the most violations. Six Samsung companies were found using electricity at the wrong tariffs and were fined accordingly. Samsung Electronics and Samsung SDI respectively paid KRW 27 billion and KRW 1.1 billion in penalties for using industrial electricity at R&D facilities. Samsung Total, Cheil Industries, Samsung Electro-mechanics, and Samsung Heavy Industries also wrongly used industrial electricity.

 LG Display paid KRW 31.99 million in penalties for industrial electricity used at an employee dormitory. CJ Construction used it to water a golf course.

 Public corporations, the armed forces, and universities have also been penalized for violations.

“Large corporations like Samsung benefit immensely from industrial electricity sold at less than production cost,” said Rep. Kim Je-nam to the Hankyoreh newspaper, “Now they’re making off with tens of billions of won more by breaking the rules and using industrial electricity where they should be paying regular rates.” Ms. Kim is an independent member of the National Assembly.

Government policy has favoured cheap electricity. Low rates have served as subsidies to industry but, unable to cover costs, Korea Electric Power Corp. has accumulated losses of KRW12,800 Billion since 2008.

South Korea also faces severe power shortages this winter due to cuts in nuclear power generation. Six reactors have been idled after the discovery that Korean suppliers provided fake parts with forged documentation in their construction. Widespread corporate electricity theft has only made matters worse.

Against fierce opposition, the Government increased industrial tariffs by 6.4 percent late November. Business leader say this will reduce competitiveness. However, A Bank of Korea study showed electricity accounted for just 1.33 percent of manufacturing costs in 2011 – less than the 2000’s 1.65 percent.

In 2012, the OECD average industrial electricity cost was US$122.30/MWh, while South Korea’s was US$82.40. According to the International Energy Agency, in 2012, Korea had the third-lowest electricity costs for industry among 33 OECD countries.

Some companies now say they will have to cut back power consumption in offices and elsewhere, which is what the government had hoped.


Picture credit: © Glenn Jenkinson | Dreamstime Stock Photos

Asia | Corruption

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