Gas rates for households hiked 6.8 percent, but utility's debt problem continues

Economy

Published: 05 Jul. 2024, 18:25

Gas rates for households hiked 6.8 percent, but utility's debt problem continues

A pedestrian walks past gas meters installed on a wall at a building in Seoul on Friday. [YONHAP]

Korea upped the gas rates for households by 6.8 percent, or 1.41 won per megajoule, as state utilities continue to struggle under burgeoning debt burdens.

It marks the first rate hike since May of last year. The increase, which will take effect starting Aug. 1, is expected to cost an average four-person household in Seoul an additional 3,770 won a month.

The announcement was made on Friday by the Korea Gas Corp. (Kogas), a state-run gas supplier.

The gas rate for non-industrial private use will be raised by 1.30 won per megajoule.

Household and non-industrial gas rates have remained unchanged since the 5.3-percent increase in May last year. Gas is supplied at prices below costs as the government capped utility prices to reduce the burden on the household economy amid high inflation.

Despite the latest increase, the price is still below costs, according to Kogas.

The price limit has been heavily affecting electricity and gas suppliers, especially since the steep surge in fuel prices spurred by Russia’s invasion of Ukraine in 2022.

Kogas’ accounts receivable — the outstanding balance owed by customers — totaled 13.5 trillion won ($9.8 billion) in the first quarter this year, up from 13 trillion won by the end of last year. The figure stood at 1.8 trillion won at the end of 2021 but has surged sharply since 2022.

The remaining balance, effectively serving as losses, has cost Kogas over 500 billion won a year in interest payments, according to the company. Kogas’ debt-to-equity ratio stood at 624 percent as of the first quarter.

The latest rate hike is expected to slow the increase in accounts receivable but is unlikely to result in a reduction, meaning that further hikes might occur sooner rather than later.

Following the announcement of the rate increase, Kogas's share price gained 3.98 percent on the main Kospi bourse from the previous trading day to close at 47,050 won on Friday.

Meanwhile, Kogas said that it expanded its energy efficiency enhancement program for low-income families and social welfare facilities, increasing the number of recipients tenfold to 2,350 sites from 2025 to 2027.

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