Korea freezes electricity rates for Q3

Industry

Published: 21 Jun. 2023, 09:41 Updated: 21 Jun. 2023, 15:27

Korea freezes electricity rates for Q3

A pedestrian walks past electricity meters affixed to a wall in central Seoul. The Korea Electric Power Corporation on Wednesday announced its decision to freeze the electricity rate in the third quarter. [YONHAP]

The government froze the electricity rates in the third quarter, as steep hikes over the past year have put a strain on household finances in Korea amid high commodity prices.

The state-run Korea Electric Power Corporation (Kepco) on Wednesday announced that the electricity price for the July-Septemper period will remain the same from the previous quarter.

The decision came in after five consecutive rate hikes since April last year, which pushed up electricity prices by 40.4 won ($0.03) per kilowatt-hour, or 39.6 percent.

Second Vice Minister Kang Kyung-sung of Trade, Industry and Energy has previously signaled a rate freeze, saying, "I do not think a rate hike will be an easy choice, given the current price burden on the public," during a press briefing on June 14.

The falling global fuel prices also alleviated the upward pressure on utility rates.

The global crude price, which stood at around $108 per barrel at this time last year, dropped to the $70 level this year, according to the Energy Ministry.

However, Kepco's stacked-up deficit remains a significant burden on the utility.

Kepco is saddled with an accumulated loss of 44.7 trillion won since 2021, as of the first quarter of this year, largely driven by high fuel prices.

Analysts forecast Kepco will lose another 7.4 trillion won in operating loss this year, according to market tracker FnGuide.

The Energy Ministry has previously estimated rates for electricity would have to be increased 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, to erase Kepco's rising deficit.

To meet the target, the electricity rate needs to be upped by an additional 30.5 won per kilowatt-hour this year, yet the government may adjust its pace of hikes in accordance with the falling energy prices.

Kang said the ministry's "predictions on the rate hikes may be adjusted from last year's estimation."

To address the burgeoning debt, Kepco announced a 25-trillion-won restructuring plan to restore its fiscal soundness that will run through 2026 in May.

In its latest plan, the company promised to cut costs by delaying facility construction projects and investments and reducing operating expenses while working with the government to reform the current market system to cut spending on purchasing electricity.

Following the mounting political pressure over the ballooning deficit, Kepco's former CEO Cheong Seung-il stepped down from his post in May.

The top position still remains vacant since Cheong's resignation.

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