N-SOO NAMCONNECT
Updated Nov. 19, 2013 2:30 a.m. ET
SEOUL—South Korea said Tuesday it will raise electricity prices and impose taxes on the use of thermal coal in power plants as the country struggles to meet rising power demand.
State-run power utility Korea Electric Power Corp. will be allowed to raise electricity rates by an average 5.4% from Thursday, the Ministry of Trade, Industry and Energy said in a statement.
The move comes as the energy-deficient country has been seeing record highs for power consumption, particularly by industrial users, taking advantage of relatively low tariffs.
"The price hike is necessary to better balance the country's power demand and supply situation by possibly curbing demand for electricity," the ministry said in a statement.
Asia's fourth-largest economy, which imports almost all of its energy resources, has been levying electricity tariffs on industrial users at well below cost in recent years in an effort help large exporters and at the same time keep a lid on inflation.
The policy has been criticized as favoring large export-oriented companies at the expense of small and medium-size firms and household users, particularly after a nationwide blackout in September, 2011.
Korea Electric Power has been seeking an increase in power tariffs as it can't fully cover its costs at the current rate.
The previous raise of around 4.0% took place in January.
The latest increase announced Tuesday is projected to raise the average annual consumer inflation rate by 0.056 percentage point, the ministry said.
The government also said it would newly impose taxes on the use of thermal coal in power plants and cut taxes on liquefied natural gas and kerosene to narrow price gaps between different sources of power generation.
The move, set to take effect from July next year, will also help lower the use of electricity, it said.
The ministry said it plans to initially levy a tax of 21 won ($0.02) per kilogram of imported coal and adjust flexibly according to local demand.
Park Il-chul, a director at the ministry's energy resource policy department said the decision could boost the nation's coal import costs over the long term, but won't significantly cut its import volumes.
"Kepco's power generating firms won't likely reduce imports in the near future because they have to meet power demand. But they'll look for alternatives to cut costs," said Mr. Park.
Korea Electric's five power-generating units import a combined 78 million metric tons of thermal coal every year.
Korea is the world's fourth-largest coal importer, after China, Japan and India, with the value of imports amounting to $15.9 billion last year.
Write to In-Soo Nam at In-Soo.Nam@wsj.com