Effects of relaxing South Korea's increasing-block electricity pricing structure on residential consumers

Abstract

During the extreme heatwaves of 2016, the South Korean government temporarily modified the increasing-block rate (IBR) pricing structure by expanding the usage thresholds for each pricing tier to reduce the burden of electricity bills. This study examines the effects of this adjustment on residential electricity consumption. Using a quasi-experimental approach with household survey data, the analysis reveals that households increase their electricity consumption after receiving bills with reduced charges, undermining the energy conservation goals of the original IBR structure. Specifically, middle-income households show a statistically significant increase in electricity usage, whereas the other groups exhibit negligible changes. The summer IBR relaxation primarily benefits middle-income households, leaving low-income households largely unaffected in terms of affordability. These findings highlight the policy challenges of trying to target and protect vulnerable households during periods of extreme heat.