Second-quarter electricity rate setting postponed

Electricity bill meter at a low-rise residential neighborhood in Seoul on Monday. [YONHAP]

The setting of electricity rates for the second quarter has been postponed as the country faces higher oil prices and the utility struggles with heavy losses.

An announcement on new electricity tariffs that was supposed to be released Monday has been delayed.

It will be the last decision on electricity pricing by the Moon Jae-in government as Yoon Suk-yeol takes office in May.

On Sunday, Korea Electric Power Corp. noted that it submitted its bill proposal for the second quarter to the Ministry of Trade, Industry and Energy on March 16.

"We have submitted an adjustment on electricity rates, which reflects the fuel cost changes between December 2021 and February 2022 to the government," Kepco said.

According to the state-own power distributor, various government departments are currently discussing the issue.

In December, Kepco was ordered by the ministry to hold electricity rates at current levels for the first three months of the year.

The company had been looking to up rates by 3 won per kilowatt-hour. It had increased prices by that amount in the October-to-December period.

Kepco has been under severe pressure to raise electricity rates as oil and natural gas prices have been rising.

Oil is now trading at about $110 a barrel after breaking $130 earlier this month. A year ago, it traded at about $60.

Higher oil prices have eaten into Kepco's profits.

The company reported a 5.2 trillion won net loss in 2021 — a record loss — from a 2 trillion won net profit in 2020, which came after two consecutive years of losses.

Kepco blamed the losses on higher costs, which were mostly driven by oil prices.

A new rate setting system was establish last year, in which prices are adjusted quarterly rather than continuously.

The current government has been against raising rates and the new government is likley to follow.

Korea is facing a fight with inflation, which is squeezing the economy — consumer prices rose 3.7 percent on year in February — and the government has been working to keep costs it can control stable.

"Last year Kepco announced plans to raise electricity rates," said Kim Sang-hun, analyst at Shinhan Investment. "However, as President-elect Yoon Suk-yeol has mentioned annulling the increase in electricity rates during the primaries, the issue could be readdressed from scratch.

"The recent ongoing sharp increase of consumer prices could also likely to affect the decision of the new administration on raising public bills."

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