Electricity and Gas Rates to Rise Again Next Month

On the 4th, a gas meter was installed in a residential area in Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Sejong=Reporter Dongwoo Lee] Next month, electricity and gas rates will increase simultaneously, and there is even a possibility of additional hikes in the fourth quarter due to rising global energy prices.

According to Korea Electric Power Corporation (KEPCO) on the 12th, the standard fuel cost applied to next month's electricity rates will increase by 4.9 KRW per kWh (kilowatt-hour). Earlier, the government decided to raise the standard fuel cost twice this year by 4.9 KRW per kWh each time, totaling 9.8 KRW, based on last year's figures.

The average monthly electricity bill burden for a family of four is expected to increase by about 1,504 KRW. Next month's gas rates will also rise by 0.4 KRW, from 1.9 KRW to 2.3 KRW per MJ (megajoule) in the settlement unit price.

The problem is that the continuous rise in international fuel costs makes additional increases unavoidable.

The price of liquefied natural gas (LNG), which accounts for the largest share in power generation, continues to soar daily. According to Korea Gas Corporation, the wholesale gas price (calorific unit price) for September was 144,634 KRW per Gcal, up 13.8% from last month (127,096 KRW). Compared to June (77,662 KRW), it has nearly doubled with an 86.3% increase.

Due to the rise in energy raw material prices, the domestic electricity wholesale price (SMP) has also set record highs three times this month. According to the Korea Power Exchange, the SMP on the 6th was 246.68 KRW per kWh, breaking the previous highest records of 228.96 KRW on the 1st and 245.42 KRW on the 2nd within four days.

Some have pointed out that KEPCO should consider additional electricity rate hikes in the fourth quarter through contract revisions in response to the SMP increase.

Among the components of electricity rates, the fuel cost adjustment fee limits the maximum quarterly or annual increase or decrease to ±5 KRW per kWh based on international fuel costs, making additional hikes in the fourth quarter impossible. KEPCO had already implemented a 5 KRW per kWh increase in the third quarter.

KEPCO's average selling price from January to July this year was 113.8 KRW per kWh, resulting in a loss of 26.2 KRW per kWh on electricity sales. KEPCO's operating loss in the first half of this year was about 14 trillion KRW, and the deficit is expected to reach approximately 30 trillion KRW by the end of the year.