Gov't tells Kepco not to raise electric bills again

Despite rising oil prices, the government won't raise electric bills in the third quarter, citing worries about inflation. This is the second consecutive quarter the bills remained unchanged.

Air conditioners on the side of a building in Seoul oon Monday. With rising heat, energy consumption is expected to rise with more people turning on the cooling system. Yet the government has decide to freeze the energy bill in the third quarter worrying rising inflation impact on household amid Covid-19. [YONHAP]

Despite rising oil prices, the government won't raise electric bills in the third quarter, citing worries about inflation.

This is the second consecutive quarter since the billing system was changed to allow greater flexibility, but bills won't be raised yet.

According to the Korea Electric Power Corp. (Kepco) on Monday, the Ministry of Trade, Industry and Energy told the power distributor not to raise energy prices in the third quarter for the sake of households who have suffered during the Covid-19 pandemic and to avoid fueling inflation.

The government said it will review the possibility of raising electric bills in the last three months of the year if oil prices continue to rise.

Under the new billing system, Kepco was suppose to raise rates for all types of uses by 3 won per kilowatt hour, the maximum increase allowed per quarter, in the third quarter.

A family of four consuming 350 kilowatt hours would have been billed an additional 1,050 won per month, a 1.94 percent increase.

International fuel prices have been rising rapidly since April due to expectations of an economic recovery.

According to Kepco, the price of bituminous coal after tax between March and May this year averaged 133.65 won per kilogram. That’s 17.6 percent higher than the 113.61 won average between December and February.

LNG prices between March and May dropped 3.6 percent to 490.85 won per kilogram compared to the previous three months.

Bunker-C oil prices during the same period rose 17.8 percent to 521.37 won per kilogram from 442.64 won.

There is speculation that crude prices could reach $100 per barrel for the first time in seven years.

Last week, West Texas Intermediate prices rose to their highest level since 2018, while Brent crude reached its highest level since 2019. The price of Dubai crude is as high as it was in April 2019.

Dubai crude is Korea's largest type of crude import.

In 2018, Kepco reported an operating loss of 208 billion won, its first loss in six years. In 2017 the company recorded an operating profit of 4.9 trillion won. In 2019, its loss grew to 1.28 trillion won as the government kept the power company from raising electric bills.

Last year the company was able to report an operating profit of 4.09 trillion won thanks to cost cuts resulting from lower international crude prices.

That profitability continued in the first quarter of this year before international prices started to surge.

Kepco while saw a 0.1 percent dip year-on-year in revenue the first quarter of this year, operating profit increased 32.7 percent in the period.

The government is phasing out of nuclear energy, which tends to be cheap, and replacing it with renewable energy including LNG with higher unit costs. That is also chipping away at Kepco's profits.

On the news of the government freezing electric bills again, Kepco stock tumbled 6.88 percent Monday compared to Friday’s close.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]