Gas Prices to Rise Starting Tomorrow... Monthly Average Increase of 5,400 Won (Breaking News)

Gas Price Increased by 2.7 KRW per MJ... Residential Use Up 15.9%
LNG Import Cost Soars... International Spot Price 5 Times Higher in a Year
Gas Corporation's Outstanding Receivables Also Balloon... Already Surpassed 5 Trillion KRW

Gas Price Increase
(Seoul=Yonhap News) Reporter Kang Min-ji = Public utility charges for electricity and gas were raised simultaneously starting July 1. For a household of four, the average monthly electricity bill increased by 1,535 KRW, and the gas bill rose by 2,220 KRW per household. The photo shows a gas meter in a residential area of Seoul on that day, July 1, 2022.
mjkang@yna.co.kr
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[Asia Economy Sejong=Reporter Lee Jun-hyung] The government will raise city gas prices in the fourth quarter. This is due to soaring international natural gas prices driving up the cost of gas imports. With this increase, the average monthly gas bill per household is expected to rise by 5,400 won.

The Ministry of Trade, Industry and Energy announced on the 30th that from next month, the city gas prices for residential and general use will increase by 2.7 won per MJ (megajoule). This reflects the settlement price (0.4 won) confirmed when the ministry revised the 'Natural Gas Supply Regulations' last December, along with the increase in the base raw material cost (2.3 won).

Following the government's decision to raise gas prices, the residential rate will increase from the current 16.99 won per MJ to 19.69 won. The general use rate will be adjusted to 19.32 won. The rate increase is 15.9% for residential use and between 16.4% and 17.4% for general use. Based on Seoul standards, the average monthly gas bill per household is expected to rise by 5,400 won.

The government maintains that the increase in city gas prices is unavoidable. This is because international liquefied natural gas (LNG) prices have surged due to supply chain instability, such as Russia recently halting gas supplies to Europe. According to the Ministry of Trade, Industry and Energy, the spot price of natural gas in the third quarter of this year was 47 dollars per million Btu (British thermal unit), nearly five times higher than the 10 dollars in the first quarter of last year.

The sharp rise in the exchange rate is also fueling the increase in natural gas import costs. The won-dollar exchange rate surpassed 1,440 won on the 29th, marking the highest level in 13 years and 6 months since the global financial crisis in 2009.

However, gas prices have not kept pace with the rise in natural gas import costs, causing unpaid receivables for Korea Gas Corporation to balloon. Unpaid receivables occur when the gas corporation fails to recover the cost of imported LNG from domestic gas prices. As of the second quarter, Korea Gas Corporation’s unpaid receivables have already exceeded 5 trillion won, standing at 5.1 trillion won. The Ministry of Trade, Industry and Energy expects the corporation’s cumulative unpaid receivables this year to reach a record high.

An official from the ministry stated, "If unpaid receivables accumulate excessively, it will become difficult to secure funds for natural gas procurement during the winter, potentially disrupting natural gas supply and demand. Therefore, we have unavoidably decided to raise gas prices at the minimum necessary level."