KEPCO: "SMP Price Cap Policy to Reduce Public Burden"

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee] Korea Electric Power Corporation (KEPCO) announced on the 29th that the electricity wholesale price (SMP) cap system, which will be implemented from next month, is a "policy to reduce the burden on the public."

At a meeting with reporters at the Ministry of Trade, Industry and Energy on the same day, KEPCO stated, "The SMP cap system is not intended to cover KEPCO's deficits but to reduce excessive profits of some operators." The SMP cap system sets an upper limit on the electricity wholesale price, which serves as the standard price when KEPCO purchases electricity from power generators.

KEPCO emphasized that contrary to power generators' claims that private operators would incur massive losses if the cap system is implemented, "there will be no losses because KEPCO compensates for the fuel costs of the generators." It explained that since it is stipulated that fuel costs exceeding the cap will be compensated, there is effectively no loss.

KEPCO also stressed that major overseas countries have already introduced SMP cap systems. In fact, Spain and Portugal have introduced gas price caps to mitigate excessive SMP, which is said to have the same effect as Korea's SMP cap system.

A KEPCO official said, "The SMP cap system aims to protect consumers and prevent the burden from being passed on to future generations," adding, "It can reduce the burden of electricity rate hikes in some countries and help respond to inflationary pressures."

Earlier, KEPCO recorded a record deficit of 21.8342 trillion won in the cumulative third quarter of this year. This figure is more than three times the deficit of 5.8601 trillion won last year, and a total deficit of around 30 trillion won is expected by the end of this year.

However, private power generators maintain that massive losses are inevitable if the SMP cap system is implemented. The ‘SMP Cap Joint Countermeasures Committee,’ composed of the Renewable Energy Industry Development Council and the National Solar Power Association, claimed, "It will deal a severe blow to the renewable energy and district energy power generation sectors, leading to the destruction of the industrial ecosystem, obstacles to achieving carbon neutrality, and damage to national competitiveness."