Electricity rates in Korea likely to be raised by less than 10% for Q2

[Photo by Lee Chung-woo]

The South Korean government and state utility Korea Electric Power Corp. (KEPCO) are likely to raise the electricity rates by less than 10 percent for the second quarter amid rising inflationary pressure on the households. The decision on the rate hike, however, has been postponed as more time will be needed to assess global energy price trends and expert opinions.

According to multiple sources from the power industry on Thursday, the electricity rates are poised to be raised by under 10 won per kilowatt hour (kWh) for the second quarter.

Electricity rates are set based on a combination of a base rate, fuel cost adjustment rate, climate environment fee, and basic fuel cost. The fuel cost adjustment rate is expected to remain unchanged from the first quarter at the upper cap of 5 won per kWh. Focus is on the hike in the basic fuel cost.

The government in January proposed to raise the average sales price by 14.7 won per kWh for the second quarter as it judged that a similar hike to that of the first quarter of 13.1 won per kWh is needed to resolve the mounting losses at KEPCO.

Representative Park Dae-chul of the People Power Party, however, on Wednesday noted that the accumulating losses of the energy firm pose as a pressure on the future generation but a downward trend in global energy prices this year, especially those of liquefied natural gas (LNG) and soft coal prices, should be reflected in the rate hike.

Households, in the meantime, may face the pressure of paying higher bills as the Supreme Court ruled that the progressive electricity billing system applied to residents is “fair,” nine years after the first suit was filed against KEPCO.

The top court on Thursday noted that “the progressive rate system was introduced to reasonably distribute electricity while maintaining an equity of burden among electricity users” and that it does not find that KEPCO has “abused its position” to “unilaterally write the terms and conditions.”

The Supreme Court upheld the lower court’s ruling against the 87 plaintiffs who claimed that KEPCO should return the gains from improper electricity charges.