A dim energy policy

Unsurprisingly, five key power-generating units under the state utility firm Korea Electric Power Corp. fell into the red last year, widening losses for Korea Hydro & Nuclear Power (KHNP). The parent company that oversees nuclear reactors across the country used to record a net profit of over 2 trillion won ($1.76 billion) under the previous government. Its bottom line sharply deteriorated under the Moon Jae-in administration, which vowed an incremental phase-out of nuclear plants. Last year, it incurred a net loss of 137.6 billion won. Its income took a toll after the government retired the Wolsong 1 reactor ahead of schedule and suspended the construction of the Shin Hanul 3, 4 reactors.

The reactor operating rate that was 85.3 percent in 2015 slipped to 71.2 percent in 2017 and 65.9 percent last year. Nuclear reactors that used to account for over 30 percent of the country’s power supply last year fell to 23.4 percent. The operator’s losses are bound to widen at this rate.

Other generators are also suffering. Of five power-making subsidiaries, Korea Midland Power and Korea Western Power reported losses, while others saw their net income shrivel to fractions of the previous year. They had to generate money-losing electricity due to a spike in production cost from a surge in imported oil, gas and other fuel. Under the new energy outline, they had to bump up the use of costly renewable energy source and LNG instead of cheap nuclear fuel. Their bottom line could improve if international fuel prices continue to fall, but the government-enforced nuclear phase-out is bound to push up costs higher. Purchasing electricity from nuclear reactors was 62.05 won per kilowatt per hour last year, while it was 180.98 won and 121.22 won from renewable sources or LNG generators, respectively.

The forced upgrade of contract workforce to the permanent payroll under the Moon administration also worsened the financial structure of the utility firms. KHNP converted 2,000 part-time workers to full-time positions. The other five subsidiaries also transferred 2,180 contract workers to the permanent payroll. Even if the government does not withdraw its reactor phase-out, it should be flexible on energy policy in line with the developments in the global fuel market to prevent large state firms from turning into massive deficit-ridden entities. Ballooning losses at public enterprises translate into higher utility bills and budgetary subsidies. The government must stop dumping the bills for its policy failures on the people.

JoongAng Ilbo, March 18, Page 30