Korea's Industrial Electricity Tariff End to End: Basic Charge, Energy, Power Factor, Peak

Anyone on a manufacturing or logistics site has probably held an electricity bill running into tens of millions of won a month and wondered why on earth it came out so high. It is easy to put it down vaguely to using a lot, but in reality there are far more sites than you would think that pay more than they need to simply because they do not understand the tariff structure itself.

KEPCO's electricity tariffs rose by close to KRW 50 per kWh cumulatively between 2022 and 2024, making them a key variable shaking the cost structure of manufacturing. Even so, companies that understand and manage the tariff system precisely remain rare. This article is a from-first-principles account of how industrial electricity is billed and where the cost leaks.

How the industrial electricity bill is put together

A single bill is the sum of several items. Sorting out what each item is charged on makes the structure clear at a glance.

Unit prices and coefficients are as at the time of citation and change with tariff reforms and quarterly adjustments. For the exact current unit prices you need to check KEPCO's tariff table.

The basic charge and the energy charge — the two load-bearing parts

Many people pay attention only to the energy charge, the "pay for what you used" part, but from a company's point of view managing the basic charge matters far more.

The basic charge — billed as a fixed monthly amount on the basis of contract power (kW). It arrives regardless of actual usage.

The energy charge — billed according to the electricity actually used (kWh), with different unit prices across the off-peak (overnight), mid-peak and peak bands.

The key point here is that the basic charge is determined by maximum demand (peak usage). Put simply, if there was even one month in the past 12 in which power use shot up, that record becomes the basis and a high basic charge is billed every month. Air conditioning run flat out in midsummer, everything restarted at once after an equipment inspection, a temporary surge in output — any one of these affects the bill for close to a year afterwards.

Not knowing your contract type costs you

Industrial electricity has a concept called the contract type. It is divided by the size of contract power and the method of supply, and the choice changes the basic charge and energy charge unit prices completely.

Simply checking whether your site's contract type is the right one, and whether contract power is set excessively high against actual usage, can make a difference of several million won a month. Contract power can be changed by application to KEPCO, but it is safer to move only after analysing at least a year of usage data. Cut it blindly and exceed it at the peak, and excess-use charges arise.

Three real reasons the bill goes up

① The peak is not being managed — as explained above, maximum demand determines the basic charge. Adjusting the production schedule slightly, or changing the habit of switching on every piece of equipment at once at the start of the shift, can bring the peak figure down. This is an area where, unexpectedly, changing only how you operate produces results without any capital spend.

② Overnight (off-peak) power is not being used — industrial tariffs have large gaps between time bands. The energy charge unit price in the peak band (the daytime peak) and in the off-peak band (overnight) differ by up to three times or more. Where the process allows, there are cases where simply moving some work to nights cut the electricity bill noticeably. (How much is saved varies greatly by process and load pattern.)

③ The power factor penalty is being left alone — the power factor charge line at the bottom of the bill is a reduction if the lagging power factor in daytime hours (08:00–22:00) is above 92% and a surcharge if it falls short (KEPCO's Basic Terms of Supply, Article 43(2), in force 1 February 2025). The commonly cited "90% benchmark" is the pre-amendment figure. The more old motors and ageing equipment a plant has, the more easily the power factor falls, and left alone it piles up unnecessary charges every month. In many cases it is resolved by relatively simple measures such as installing capacitors.

Three things to check right now

1. Find the month with the highest maximum demand, and the figure, from your last 12 bills.
2. Have KEPCO or a specialist check whether your contract power and contract type are appropriate against your actual operating pattern.
3. If the power factor on the bill is showing below 92%, examine remedial measures immediately.

If any one of the three leaves you saying "I don't really know", that in itself can be a signal that you are losing money on the tariff.

Questions we are often asked

If the basic charge is fixed, why is it something to manage?

The basic charge is "fixed", but the maximum demand that sets its amount is a figure we created. Because one spike becomes the basis for 12 months, pressing the peak down alone brings the fixed cost itself down. It is a different axis of saving from reducing usage.

Is lowering contract power always a gain?

No. If you lower it and your actual peak then exceeds contract power, excess-use charges are added. It is safer to check your peak pattern against at least a year of usage data and then adjust with some headroom left.

How large is the power factor charge?

It depends on the power factor and the scale of use. For every 1 percentage point below the 92% daytime lagging power factor, 0.2% of the basic charge is added, and above it the same rate applies as a reduction up to 97%. Unit prices and coefficients are published in the tariff table. The more ageing equipment you have, the heavier the burden of leaving it alone, so the first step is to check the power factor shown on the bill.

Where do I find the latest unit prices?

This article explains the tariff structure from first principles, so it does not cover specific unit prices. Because reforms and quarterly adjustments change them, please refer to KEPCO's tariff table and articles covering the relevant reforms for the latest figures.

In summary

Industrial electricity tariffs look complicated, but the frame is simple.

1. The basic charge — a fixed cost set by contract power and maximum demand. Peak management is the key.
2. The energy charge — usage × the time-band unit price. It can be reduced by shifting to overnight hours.
3. The power factor charge, the climate and environment charge and the fuel cost adjustment — the 92% lagging power factor benchmark (08:00–22:00), plus additional items charged at published unit prices.

Since 2025 the pressure to comply with RE100 has been moving faster through the supply structures of mid-sized and large companies. Understanding your electricity tariff structure goes beyond straightforward cost saving: it becomes the starting point for designing a renewable transition later. That is why grasping your site's tariff structure precisely matters far more than it might appear.