[Asia Economy Sejong=Reporter Dongwoo Lee] Among the power generation companies selling electricity to Korea Electric Power Corporation (KEPCO), those with excessively high System Marginal Price (SMP) will have a temporary cap placed on the settlement price.
The Ministry of Trade, Industry and Energy announced on the 24th that it will publicly notify for 20 days, from today until July 13, a partial amendment including the establishment of the "Emergency Settlement Price Cap for the Electricity Market" system and the "Notice on the Cap of Electricity Trading Prices."
Specifically, power generation companies whose average SMP over the previous three months falls within the top 10% of the monthly average SMP values over the past 10 years will receive SMP at a normal settlement price for one month. The normal settlement price is set at 1.25 times the 10-year weighted average SMP.
In summary, among the power generation companies selling electricity to KEPCO, those whose average SMP in the last three months ranks in the top 10% compared to the 10-year SMP average will be estimated to receive settlement at about 133.9 KRW per kWh (1.25 times the 10-year weighted average SMP). Compared to the SMP price of 202.11 KRW per kWh recorded last month for the first time since the electricity market opened in 2001, this is 68.21 KRW lower.
However, power generators whose actual fuel costs exceed the cap price will be compensated for the actual fuel costs, and other capacity charges and additional settlements will be paid without restriction to avoid excessive burdens on the operators.
The government's administrative notice aims to introduce the "Emergency Settlement Price Cap for the Electricity Market" system to reduce the burden on electricity consumers caused by the surge in SMP. The Ministry of Trade, Industry and Energy stated, "The system was introduced to prepare for the situation where the amount electricity consumers have to bear rapidly increases due to the sharp rise in international fuel prices following the Russia-Ukraine war."
Until now, power generators have been settled at SMP, which is calculated based on the cost of the most expensive generator meeting hourly electricity demand in the electricity market operated by the Korea Power Exchange.
This means that when international fuel prices rise, SMP also rises, and when fuel prices surge excessively recently, SMP skyrockets, causing a significant increase in settlement payments to power generators. Since these settlement payments are ultimately borne by KEPCO and recovered through electricity rates, the increase in settlement payments translates into a burden on electricity consumers.
The newly introduced Emergency Settlement Price Cap system will temporarily apply a normal settlement price level when electricity market prices abnormally rise due to sharp increases in international fuel prices.
The Ministry of Trade, Industry and Energy plans to collect opinions from electricity consumers and related businesses during the administrative notice period and introduce a system that adequately protects consumers in the domestic electricity market.
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