Will Electricity Rates Rise in Q3?… KEPCO to Announce Price Hike Decision on the 21st

(Photo) [Image source=Yonhap News]

[Asia Economy Reporter Joo Sang-don] Korea Electric Power Corporation (KEPCO) will announce on the 21st whether electricity rates will be increased for July to September this year.

The government and KEPCO introduced a fuel cost linkage system this year, which reflects fuel costs incurred in electricity production into electricity rates every three months. The electricity rates for the third quarter are determined based on fuel costs from March to May.

During this period, the average price of Dubai crude oil was around $64 per barrel, about 16% higher than the average price at the reference point for the second quarter (December last year to February this year), which was $55. An increase in electricity rates for the third quarter is inevitable.

Considering the rise in international oil prices and other fuel costs since the beginning of this year, raising electricity rates is appropriate; however, there is also speculation that rates may be frozen due to growing concerns about inflation. Since the start of this year, international oil prices have surged sharply, causing consumer prices last month to rise the most in 9 years and 1 month, heightening inflation concerns. On the 2nd, Lee Eok-won, the First Vice Minister of Strategy and Finance, stated, "Public utility rates such as electricity and gas will be managed stably while monitoring the overall price situation."

The government also postponed the electricity rate increase for the second quarter. Although the fuel cost increase should have raised rates by 2.8 won per kWh, the rates were frozen due to concerns that raising public utility prices could stimulate inflation and burden low-income households.

If electricity rates are frozen again in the third quarter, controversy over the fuel cost linkage system becoming ineffective is inevitable. Additionally, if the rise in fuel prices is not reflected in electricity rates, it will inevitably have a negative impact on KEPCO's performance.