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Squeezing Kepco

Published: 15 Feb. 2019, 18:03

Korea Electric Power (Kepco), which used to generate an operating profit of over 10 trillion won ($8.9 billion) a year, reported a loss last year. The company is expected to go deeper into the red this year. According an internal report, the state utility firm estimated an operating loss of 2.4 trillion won and net loss of 1.9 trillion won for 2019. Increased environmental costs — the upgrade of nuclear plant safety and the quota for renewable energy sources — were cited as factors weighing on the bottom line.

The income statement deteriorated under the state energy plan of phasing out of nuclear fuel and increasing costlier renewables. Kepco hoped for an easing in fuel prices and increased nuclear plant operation.

But whether its hope can be met is questionable. Under the energy outline, the operation rate of nuclear plants, which sank into the 60-percent range last year, will improve to 79.9 percent this year. But the reactivation of the Hanbit Unit 1 and Unit 2 and Hanul Unit 1 have been repeatedly delayed. The operation rate could fall further as plants go out for rotational repair and maintenance.

The renewable portfolio standard (RPS) poses greater burden. The renewable share will have to reach 10 percent in 2024. The dent on the bottom line was less severe when oil prices were high in the past. But oil prices are relatively low, and the math does not work so well now. Kepco spent 1.5 trillion won to meet the RPS ratio of 4.5 percent last year. Utility charges will inevitably rise when the renewable share reaches 10 percent in 2024.

Kepco CEO Kim Jong-kap is calling for a rationalization in electricity rates to prevent a further deterioration of the company’s financial position. Albeit gradually, electricity bills will have to go up. It is bewildering why the government insists on phasing out of nuclear power at the risk of ruining the state utility and driving up electricity bills.

JoongAng Ilbo, Feb. 15, Page 34