S. Korea to start lifting utility rates in summer to aid KEPCO despite inflation

[Graphics by Song Ji-yoon]

South Korea is lifting long-capped electricity rates in the third quarter and may have to make additional move in the following quarters upon watching the impact on the inflation to curtail state utility monopoly’s swelling deficit.

Upon endorsement from the government, Korea Electric Power Corp. (KEPCO) on Monday posted a hike in the adjusted unit fuel cost by 5 won ($0.0039) per kilowatt hour for the July-September period.

The raise is pitiful compared to 33.6 won argued by KEPCO as it projected fuel cost to be 582.90 won to generate a kg of power in the coming quarter, 72 percent higher than the base rate of 338.87 won.

As a rise of 1 won kwh is estimated to bolster annual income by 529.9 billion won, a hike of 5 won can add 1.3 trillion won in operating profit in the second half, which cannot help the utility company that in the first quarter alone incurred a loss of 7.8 trillion won.

[Photo by MK DB]

While not much easing the financial troubles of KEPCO, the hike in utility fees would aggravate households during the summer when inflation rate is expected to hover above 6 percent.

Separately, the government would be raising city gas by 1.11 won per megajoule starting July.

As a result, a family of four consuming 307 kilowatt-hours a month will pay an additional 1,535 won. For gas, they will pay an average of 2,220 won more per month, the industry ministry said.

Under KEPCO’s flexible rate system first adopted last year, the company continuously requested the increase against recent spikes in global energy prices and heavy operating losses, but the government did not approve of the raises due to hardship from Covid-19 restrictions and later from inflationary pressure.

Despite record per capita power use last year to place Korea’s per capita electricity consumption at the third highest in the world, residential electricity rates had been the 4th cheapest among the OECD member countries.

[ⓒ Maeil Business Newspaper & mk.co.kr, All rights reserved]