KEPCO temporarily postponed announcement of second-quarter electricity bill increase

KEPCO suddenly canceled its plan to adjust electricity bills in the second quarter, when attention was focused on whether to raise electricity bills. This is interpreted as the result of the government and the president-elect's uncoordinated coordination at a time when President-elect Yoon Seok-yeol promised to "cancel the increase in electricity prices" during the presidential election. KEPCO's cumulative deficit is deepening at a time when energy prices such as international oil prices continue to rise.

The Ministry of Trade, Industry and Energy and KEPCO announced on the evening of the 20th that they will postpone the announcement of the fuel cost adjustment unit price, which was scheduled to be announced at 8 a.m. on the 21st. KEPCO has calculated the fuel cost adjustment unit price in the second quarter, reflecting changes in fuel costs from December last year to February this year, and submitted it to the government on the 16th. KEPCO said that the Ministry of Industry and related ministries were in talks on adjusting electricity prices, and as a result of the consultation, they were notified of their opinions to confirm it after replying.

In December last year, the government decided to raise the rate to 11.8 won per kWh regardless of the fuel cost adjustment unit price. In April and October, the government will raise the standard fuel cost reflected in electricity bills by 4.9 won per kWh to a total of 9.8 won. The climate and environmental charges have also been raised by two won to 7.3 won since April.

Separately, according to the fuel cost linkage system introduced by the government in January last year, if power generation fuel costs rise or fall every quarter, this should be reflected in the rate. Considering the recent surge in international oil and liquefied natural gas (LNG) prices, it is inevitable to raise the cost of fuel. However, the increase in fuel cost adjustment unit price is limited to less than 3 won per kWh. According to the principle, starting next month, the procedure was to increase 9.9 won per kWh, including the standard fuel cost, climate environment rate, and fuel cost adjustment unit price.

However, the delay in the announcement of the price adjustment for electricity is attributable to the lack of coordination between Yoon and the ministries. This is because Yoon promised to scrap the government's plan to raise electricity bills in consideration of the COVID-19 situation and refrain from raising electricity bills until the end of COVID-19. As a result, government ministries involved in adjusting electricity bills, including the Ministry of Strategy and Finance and the Ministry of Industry, are believed to be burdened by the previously planned increase in electricity bills.

The problem is that KEPCO's deficit is deepening due to the continuous rise in fuel costs and the government's measures to freeze electricity bills. Since last year, international oil prices have risen steadily, especially due to Russia's invasion of Ukraine and subsequent Western sanctions against Russia, reaching their highest level in seven years. However, the current government froze electricity bills one after another in the second and third quarters of last year and the first quarter of this year on the grounds of "price stability." As a result, KEPCO recorded the largest operating loss of 5.8 trillion won last year. There are also concerns that KEPCO's deficit could rise to up to 20 trillion won this year. An official from the power generation industry said, "The accumulation of deficits by KEPCO, a public company, will somehow lead to a burden on the public," adding, "The realization of electricity bills cannot be delayed any longer."