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Kepco agrees to summer rate cut

Utility adjusts, for two months, its residential electricity rate table

July 01,2019
Korea Electric Power Corporation (Kepco) is revising its power rate table following the recommendation of a special panel.

That could mean lower electricity bills for many. It could also mean higher costs for Kepco, which will be making up the difference between the old and new rates.

The state-run electric power utility announced Friday that its board of directors accepted the recommendation of a government-civilian panel to implement a new rate system that eases the financial burden of residential power use during the summer. The new rate table will be effective this month.

Under the current system, which has been in place for 40 years, Kepco applies a three-stage progressive rate schedule for residential power use. The difference in cost between the lower and higher rates is up to three fold.

When the new rate system comes into effect, the first two ceilings will be temporarily lifted, meaning residential customers will pay the same rate even when using more electricity. The suspension will run through the end of August.

The new rate system will take effect immediately once the government finalizes approval.

The discount is expected to further burden the already struggling state-run electric utility. Some analysts project that Kepco will have to shoulder the nearly 300 billion won ($260 million) cost of the discounts.

Kepco’s fortunes have weakened in recent years since the Moon Jae-in administration vowed to aggressively shift from traditional sources of energy, such as coal and nuclear power, and more toward renewables.

Amid the government initiative, Kepco reported its worst-ever first-quarter operating loss in May of 629.9 billion won, far below analyst expectations of a loss of 41.9 billion won. The utility’s annual operating profit declined from 12 trillion won in 2016 to 4.9 trillion won in 2017.

Last year, Kepco reported an annual operating loss of 208 billion won.

Kepco officials have already expressed concern over the costs of the revised schedule.

“There should be commitment to social responsibility, but we must also consider the interests of shareholders,” said Kwon Ki-bo, head of sales at Kepco, during a public discussion on the billing system overhaul earlier in June.

Some analysts predict that the new rates will not seriously affect Kepco, as the revision is similar to last summer’s temporary discounts, adding the new rate system would instead help the company to focus on improving its earnings.

“Kepco’s electricity tariffs in the third quarter of 2019 are expected to be largely similar to levels a year before because the reformed system is a near copy of the temporary rate cut last year,” said Kang Seong-jin, an analyst at KB Securities.

BY KO JUN-TAE [ko.juntae@joongang.co.kr]


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