9 out of 10 root small and medium enterprises must include electricity fees in the target for payment linked to supply, according to research results.
The Korea Federation of Small and Medium Enterprises and Democratic Party of Korea lawmaker Oh Se-hee (Trade, Industry, Energy, SMEs, and Startups Committee) jointly announced the results of a survey on the demand for a policy to include electricity fees in the target for payment linked to supply, conducted on 700 small and medium enterprises in the five major root industries on the 24th.
The survey, conducted from the 14th to the 23rd of last month, aimed to understand the proportion and burden of electricity fees in root industries amid a sharp rise in industrial electricity fees, and to gauge the opinions of root small and medium enterprises on a policy to expand the targets of payment linked to supply to include electricity fees.
The results showed that more than 80% of root small and medium enterprises have electricity fees accounting for more than 10% of their manufacturing costs. By type of root industry, the proportion of companies with electricity fees exceeding 10% of manufacturing costs was highest in the heat treatment industry at 99.3%, followed by the surface treatment industry (85.7%), casting industry (79.3%), and mold industry (75.7%).
In particular, in the heat treatment and surface treatment industries, the proportion of companies responding that electricity fees account for more than 20% exceeded 50%. The industrial high-pressure A standard electricity rate rose from 105.5 won/kWh in the first quarter of 2022 to 174 won/kWh in the fourth quarter of 2024, and 9 out of 10 companies reported feeling management pressure due to this increase in industrial electricity fees.
When asked whether they requested the contracting companies to reflect the increase in electricity fees in the payment, more than 7 out of 10 small and medium enterprises responded that they had 'not made a request.' Among them, 69.3% cited 'difficulty in attempting to request due to concerns about worsening relationships with clients.'
Regarding how to cope when the increase in electricity fees is not reflected in the payment, the highest response was 'no special measures' at 70.1%, followed by 'supplied below cost to continue the transaction' at 25.4%.
On whether electricity fees should be included in the targets for payment linked to supply, 90% of root small and medium enterprises answered 'it should be included.' The reasons for including electricity fees in the targets for payment linked to supply (multiple responses) were: ▲ in line with the intention of the introduction of the payment linked to supply system for proper pricing (52.9%) ▲ the government's burden relief policy for electricity fees is temporary depending on the budget situation, making it difficult to be a long-term solution (39.2%) ▲ the current linked system is limited to raw materials and does not reflect a significant portion of costs (36.0%).
Yang Chan-hwa, head of the innovation growth department at the Korea Federation of Small and Medium Enterprises, noted, 'In October 2023, the payment linked to supply system, which has been a 14-year wish of the small and medium enterprise community, was officially implemented; however, the targets for linking payments are limited to 'major raw materials,' so root industries that actually use electricity as a 'major raw material' are left in the blind spot of the payment linked to supply system.' He added, 'As the National Assembly empathizes with the management situation of root industries and has proposed various bills for including electricity fees in the payment linked to supply system, I hope for prompt legislative supplements.'