Korea to announce utility, gas fee increases for second quarter soon

[Photo by Lee Seung-hwan]

South Korean state utilities Korea Electric Power Corp. and Korea Gas Corp. are expected to announce adjustments in their fees as early as next week, along with additional intensive measures to improve its financials to curb ballooning losses.

Maeil Business Newspaper has learned on Wednesday that the government and the ruling People Power Party are engaged in last-minute talks about raising electricity and gas rates by a single digit for the second quarter. Once the hike rate is set, the two utility firms plan to also introduce additional measures including downsizing and returning wage increases.

KEPCO and KOGAS are also expected to consider executives giving up their bonuses depending on the results of the public organization performance valuation this year. KEPCO’s executives gave up their bonuses and wage increases last year.

The two state utility firms are also expected to decide on the adjustments in their fees for the second quarter.

“A conclusion is expected as early as next week or within this month at the latest after discussions between the government and ruling party,” said an unnamed official familiar with the matter.

The two sides had planned to announce electricity fee rates for the second quarter on March 31 but postponed the announcement due to differences in opinions.

The government and the ruling party agree on the need to raise electricity rates. It is likely that they will go with a single-digit increase of less than 10 won ($0.008) per kWh.

The Ministry of Trade, Industry and Energy is hoping to raise the rates more considering the financial crunch the public firms face, but the ruling party is trying to keep the hike limited to minimize the burden on households.

Multiple sources from the financial investment industry expected that KEPCO will have to sell large-scale bonds to cover losses if second-quarter energy fees are not raised. They projected that the company’s new bond issuance will reach 22.7 trillion won this year if electricity rates are unchanged after the second quarter.