Debt-ridden Kepco freezes electricity rates despite lower fuel prices

The state’s debt-ridden Korea Electric Power Corporation (Kepco) has frozen the electricity rate for the first quarter of next year.

Korea Electric Power Corporation (Kepco) headquarters building in Naju, South Jeolla [YONHAP]

The state’s debt-ridden Korea Electric Power Corporation (Kepco) has frozen the electricity rate for the first quarter of next year.

This marks the third consecutive quarter without an increase for households and small businesses. Industrial rates for big companies were raised by 6.9 percent in November.

The latest decision is considered to be influenced by the upcoming general election, as the government is trying to avoid posing additional financial burdens on households.

Kepco said on Thursday that the electricity rate for household and industrial use in the Jan.-March period will remain the same as the previous quarter.

Despite the overall decline in global fuel prices, Korea’s sole power distributor decided to retain the current rates as the company continues to struggle with massive debts.

Kepco’s cumulative deficits since 2021 amount to 45 trillion won ($34.5 billion), with its overall debts standing at 200 trillion won as of the first half of this year.

Although the company posted its first operating profit in 10 quarters in the July-September period, the company still faces an overall loss of 6.45 trillion won so far this year due to deficits accumulated through the first half of the year.

Korea has raised its electricity rates for five consecutive quarters since April last year, which pushed up electricity prices by 40.4 won per kilowatt-hour, or 39.6 percent, before freezing the price in the third quarter amid concerns of heavy household burdens and high commodity prices.

Though Kepco previously said that an additional rate increase of 25.9 won per kilowatt-hour is necessary to improve its financial stability, the general election slated for April next year is likely to delay the government’s decision on further hikes.

With a recent extensive blackout in Ulsan raising concerns about obsolete facilities within Korea's power supply infrastructure, the state utility’s financial struggles continue to fuel uncertainties in the country’s electricity supply.

To alleviate the financial pressure, Kepco pledged in November to roll out supplementary turnaround strategies, aiming to sell key assets and reduce its workforce by approximately 2,000 employees. This commitment comes on the heels of a 25 trillion won restructuring plan.

As it continues to grapple with the financial crisis, Kepco recently demanded that its six power generation subsidiaries, including Korea Hydro & Nuclear Power, pay interim dividends worth 3.5 trillion won.

It is the first time for the company to make such a request to its subsidiaries as year-end dividends have traditionally been paid only once a year. Given that the highest recorded amount of dividends collected so far was 923.9 billion won in 2016, coupled with the fact that the subsidiaries are currently contending with deficits, the request has faced criticism from some quarters for being perceived as excessive.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]