Gov’t, KEPCO to freeze electricity bills until Q1 2024

[Photo by Yonhap]

The South Korean government and state-owned Korea Electric Power Corporation (KEPCO) decided to freeze electricity prices for the first quarter of 2024. The decision is viewed as an attempt to prevent public dissatisfaction about rate hikes ahead of the upcoming general elections amid ongoing concerns about high inflation.

KEPCO announced on Thursday that, in consultation with the government, it has decided to freeze electricity rates in the first quarter of next year while maintaining the existing maximum charge of 5 won per kilowatt-hour (kWh) for fuel adjustment costs, the same rate as the previous year.

An official from the Ministry of Trade, Industry, and Energy said that the ministry concluded discussions to freeze electricity prices in coordination with related ministries.

Electricity bills in South Korea comprise basic charges, power consumption fees, climate and environmental fees, and fuel adjustment charges. The fuel adjustment charge is determined quarterly, reflecting changes in fuel costs over the previous three months. To protect consumers, the annual variation is restricted, ranging from a maximum increase of 5 won to a maximum decrease of 5 won.

“Considering KEPCO’s financial situation and the significant amount of unadjusted fuel adjustment fees, we decided to maintain the fuel adjustment charge at 5 won per kWh for the first quarter of 2022, consistent with the fourth quarter of 2022,” KEPCO said.

Despite projections indicating a decrease in fuel adjustment costs due to the international energy price decline from October to December 2023, KEPCO cited its substantial cumulative losses in consultation with the government to maintain the 5 won per kWh rate.

The government and KEPCO consecutively increased electricity bills in the first and second quarters of 2023, with industrial consumers experiencing an average increase of 10.6 won per kWh in November. KEPCO has faced challenges in reflecting timely increases in fuel costs, leading to its inability to adjust fuel adjustment charges downward even when fuel costs decrease.

The fuel adjustment cost was capped at 0 won even when international energy prices rise, and it was not until the third quarter of 2022 that the adjustment cost increased to 5 won.