Kepco to increase electricity prices in fourth quarter

Economy

Published: 23 Sep. 2021, 15:49 Updated: 23 Sep. 2021, 19:32

Kepco to increase electricity prices in fourth quarter

Energy meters at an apartment in Seoul on Thursday. Kepco announced that it was raising the electricity price in the fourth quarter in line with rising international fuel prices. It's the first hike in eight years. [YONHAP]

Korea Electric Power Corp. (Kepco) will be increasing electricity prices in the fourth quarter, the company said Thursday.

It is the first increase in eight years. The last was in November 2013.

According to Kepco, it is raising the price 3 won per kilowatt hour in the October-to-December period.

If a family consumes 350 kilowatt hours a month, it will have to pay 1,050 won ($0.9) more.

This is also the first increase in electricity rates since the government this year introduced a billing system that reflects the changes in input prices quarterly instead of annually.

The prices include those of crude oil, coal and liquefied natural gas (LNG).

Despite international crude prices rising in the previous quarters with the global recovery, the government kept the electricity bill steady due to the impact of Covid-19.

Kepco noted that the electricity price was lowered 3 won per kilowatt hour in the first quarter. The move in the fourth quarter will bring rates back to previous levels.

Recently, raw material prices increased despite the Covid-19 variant spreading globally.

West Texas Intermediate (WTI) on Sept. 22 traded at $72.23 per barrel, which is a 2.45 percent increase compared to the previous day. From the beginning of the year, it was up 50 percent.

Dubai crude, which dominates Korea’s crude import market, traded at $72.14 per barrel, which is up 42.5 percent compared to the beginning of this year.

Bituminous coal, which generates more electricity in Korea than any other fuel, as of Sept. 17 was priced at $137.53 per ton. That’s nearly a 70 percent surge compared to the beginning of the year, when the same amount was $79.97.

The increase in electricity prices will add to the inflationary pressures.

Other than Covid-19, another major factor that kept the government from increasing the energy price in the previous quarter was inflation.

Consumer prices have increased more than two percent on year in each of the past five consecutive months. It is the first time inflation has been above two percent for so many months since 2017.

It is likely that the 2-pecent mark will be broken for a sixth consecutive month this month due to the Chuseok holidays and the distribution of relief grants.

The government has warned that it will be increasing electricity prices in the final three months of this year.

In a statement released in June, it noted that while it was holding the electricity price steady in the third quarter, it would consider reflecting the increase in fuel prices if raw material prices remain at the same level or rise further.

The decision follows increasing losses at Kepco. Kepco has been arguing that electricity prices should be raised considering the rising costs.

The Korean power distributor in the first half suffered a 193.2 billion won operating loss, compared to an 820.4 billion won operating profit during the first six months of 2020.

The operating loss came even as Kepco reported a 1.5 percent increase in its revenue.

This was largely due to the increase in operating costs, which rose 5.3 percent during the same period.

Net losses amounted to 555.4 billion won, which is a significant increase considering that a year earlier the loss only amounted to 38.5 billion won.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]