Why Cutting Contract Power Often Fails to Cut the Bill

Reducing contract power is often recommended, because it is a saving measure that takes no capital investment and is finished with a single application form. And yet there are fewer plants than you would think where the basic charge falls by exactly as much as you cut. For a high-voltage plant, KEPCO adjusts billing demand by a separate formula immediately after the reduction, and a low-voltage plant that cuts too far ends up paying an excess-use surcharge.

Does lowering contract power reduce the basic charge?

It splits by customer type. The basic charge is calculated by multiplying the unit price by billing demand rather than contract power (how the basic charge is calculated).

Basis: KEPCO Basic Terms of Supply, Article 68(1) and (2) (in force 1 July 2026). Why the two values are different concepts is set out in contract power vs maximum demand.

Which paragraph of Article 68 are we a customer under?

The test is not the voltage or whether a meter is fitted but which paragraph of Article 38 of the Terms the meter was installed under. High voltage and above falls under Article 68(1), and for low voltage everything other than three exceptions (low-voltage educational supply, low-voltage metering within shared use of a representative customer's transformer equipment, and low-voltage common equipment at apartment buildings supplied at high voltage) falls under Article 68(2).

A common misunderstanding is that "low-voltage sites are also charged on maximum demand if a maximum demand meter is fitted." That is not the case. Low-voltage customers with contract power of 20kW or more fall under Article 68(2) even where a meter is fitted, and their billing demand is contract power as it stands. At all six low-voltage sites in our own production data, the billing demand KEPCO charged was the same as contract power, and at one of them the measured 15-minute maximum was 36kW yet it was billed at a billing demand of 50kW, its contract power (as we observe it, July 2026, all six sites).

Why does a high-voltage plant not see the full reduction?

Because Article 49(2) of the Implementation Rules adjusts billing demand immediately after a reduction. After the date of reduction, billing demand becomes the greater of 「감소 전 최대수요전력에 대한 예상 최대수요전력」 (the expected maximum demand derived from the maximum demand before the reduction) and 「감소일 이후의 실제 최대수요전력」 (the actual maximum demand after the date of reduction). The expected maximum demand is the maximum demand before the reduction multiplied by the ratio of the reduction in contract power.

As an assumption-based example, take a plant with 800kW of contract power and 600kW of maximum demand that cuts its contract power to 500kW. Its expected maximum demand is 600 × (500 ÷ 800) = 375kW, and if actual maximum demand after the reduction is 480kW, billing demand is 480kW.

Contract power came down by 300kW, but billing demand came down by only 120kW. Calculate your saving from the reduction in contract power and you will overstate it.

What is contract power based on?

It is set from equipment capacity, not actual consumption. On the using-equipment basis, the sum of the individual inputs is multiplied by the contract power conversion rate; on the transformer-equipment basis, the sum of the rated capacities of the primary transformers is used (with 1kVA treated as 1kW). The basis is Articles 19 and 20 of the Basic Terms of Supply and Articles 11 and 12 of the Implementation Rules.

The sum of all your equipment is not itself your contract power. If the using-equipment total is 300kW, contract power is 75×1.0 + 75×0.85 + 75×0.75 + 75×0.65 = 243.75kW, and because the Terms provide for rounding at the first decimal place, it is 244kW. You cannot simply lower the number at will; the equipment that forms the basis of the calculation has to actually be reduced. The concept as a whole is covered in what contract power is.

How far can you cut?

The floor is set by the excess-use surcharge. Use beyond your contract power attracts a surcharge, and the test differs by customer group (Basic Terms of Supply Article 67-3, Implementation Rules Article 48-2, in force 1 July 2026).

The "150-250% by number of excesses" is the low-voltage rule. Apply it as-is to high voltage and you will understate the amount by half. For high voltage, an excess ratio below 20% gives 150%, and at 60% or more it rises as far as 400%.

The first month of excess brings notice only, with charging from the second month, and if a customer under Article 68(1) exceeds seven times or more it becomes a ground for suspension of supply (Article 45(3), item 11 of the Terms).

Not all low-voltage sites follow the same rule. Where a maximum demand meter is fitted the test is in kW, and where there is none it is in kWh. For a low-voltage customer with a meter, the question is whether maximum demand exceeded contract power; with no meter, it is whether you exceeded 450 hours (= 450kWh) a month per 1kW of contract power.

The two tests do not overlap; only one applies. Cut contract power looking at your peak alone and you hit the first; a plant with a high load factor hits the second first.

The 450-hour test has exclusions.

[Basis: Implementation Rules of the Basic Terms of Supply, Article 48-2(1), item 2, in force 2026.07.01]

A first excess does not immediately mean a surcharge, either. In the first month you only receive guidance on increasing contract power and are not charged, but if you exceed again within three years of that month, charging starts from then. [Basis: Implementation Rules of the Basic Terms of Supply, Article 48-2(1), item 1, in force 2026.07.01]

How do you apply for a reduction?

A reduction in contract power at the customer's request falls under Article 14 of the Basic Terms of Supply, and the form is Annex Form 1-2, 「전기사용계약 변경신청서」 (application to amend an electricity use contract), from the Implementation Rules. One thing to watch is that filing by a proxy is not freely available. The Annex's 「전기사용신청 위임장」 (power of attorney for an electricity use application) is for electrical contracting firms, and a proxy must present both identification and the original electrical contracting business registration certificate.

Can you cut it and then raise it again?

You can raise it, but the cost depends on when you reverse course. Article 16 of the Basic Terms of Supply splits the facility charge into three years and ten years.

What should you check before reducing?

Not your impressions, but 15-minute usage data. That is because the months used for billing demand are fixed. For a customer under Article 68(1), billing demand is the highest of the maximum demand figures from the December, January, February, July, August and September bills plus the current month, so peaks in March, April, May, June, October and November are not captured in the charge in the first place, except where they fall in the current month. Start with your summer and winter data. How to obtain it is set out in how to get your KEPCO usage data.

Look at the measures that are easy to reverse first. Changing your optional tariff leaves your equipment alone and only changes how the charge is split between the basic charge and the energy charge, and power factor management deals with the adjustment attached to the basic charge. A reduction in contract power is a decision that costs money to reverse, so leave it for last.