Korea's electricity rates to increase 9.5 percent on Jan. 1

An electricity meter affixed to a wall of a house in Seoul on Friday [YONHAP]

Korea's electricity rates will be increased by 9.5 percent starting Jan. 1, the biggest jump since the oil crisis in the 1980s.

An average household with four members is expected to pay an additional 4,022 won ($3.20) per month.

Korea Electric Power Corporation (Kepco), the country’s sole power distributor, will raise electricity rates for the first quarter of 2023 by 13.1 won per kilowatt hour, the energy minister said Friday.

Gas rates will remain unchanged in the first quarter, in consideration of the electricity rate hike and heating costs during the winter season, yet more rate hikes for both gas and electricity are to come through the year.

Higher fuel prices have driven up costs.

“It is with a heavy heart that I am announcing the rates adjustment plan for electricity and gas amid an unprecedented cold snap and high commodity prices,” said Trade, Industry and Energy Minister Lee Chang-yang on Friday during a press conference held at the government complex in central Seoul.

Lee emphasized that “in order to address the fundamental issues by normalizing the Kepco and the Korea Gas Corporation’s business management and securing stable energy supply, a rate adjustment is inevitable.”

Fuel prices have been skyrocketing through 2022, due to the global energy crisis triggered by the Russia-Ukraine conflict.

As of November, the price of liquid natural gas (LNG) jumped 81 percent to $34 per million British thermal units, compared to last year’s $18.8. Coal price soared 160 percent to $358.4 per ton.

Kepco is expecting the rate increase will bring in an additional 7 trillion won next year.

The state-run utility has been reporting record losses. Its operating loss was 21.8 trillion won in the first nine months of the year.

It is anticipated that its operating loss will reach over 30 trillion won this year, following last year’s 6-trillion-won loss.

In order to erase Kepco's rising deficit, rates for electricity would have to be raised by at least 51.6 won per kilowatt hour in 2023, which is three times the 19.3 won per kilowatt hour increase through 2022, according to the Energy Ministry’s report.

In 2022, Kepco raised electricity rates three times: by 6.9 won per kilowatt-hour in April, 5.0 won in July, and 7.4 won in October.

“The government has been striving to reduce costs by policy improvements, such as fuel excise tax reduction and limiting system marginal price(SMP),” said Lee.

“But with the prolonged global energy crisis, such efforts are not enough for Kepco and Korea Gas Corporation to overcome the current financial crisis.”

The government recently implemented a temporary cap on the SMP, or wholesale price of electricity sold to Kepco by private power suppliers.

Moreover, the National Assembly passed a bill to raise the limit on bond sales by Kepco and Korea Gas Corporation.

“The energy crisis is expected to continue for a while, considering the current circumstance surrounding the global energy market,” added Lee.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]