Ministry of Industry to Push for Electricity and Gas Price Increase Around Double Next Year (Comprehensive)

[Asia Economy Sejong=Reporter Dongwoo Lee] The government believes that raising electricity rates by at least 51 won per kilowatt-hour (kWh) next year is necessary to normalize the management of Korea Electric Power Corporation (KEPCO).

According to the "KEPCO Management Normalization Plan" reported by the Ministry of Trade, Industry and Energy to the National Assembly's Industry, Trade, and Small and Medium Enterprises Committee on the 15th, electricity rates need to be increased by 51.6 won per kWh to normalize KEPCO's management.

Specifically, it was estimated that the base fuel cost should be raised by 45.3 won, the climate environment charge by 1.3 won, and the fuel cost adjustment unit price by 5.0 won. The fuel cost adjustment charge assumes an annual cap expanded to 10 won per kWh. In this case, it would be 2.7 times the increase this year (19.3 won per kWh).

The Ministry of Trade, Industry and Energy and KEPCO estimated that the separate baseline deficit would reach about 34 trillion won by the end of this year. If the electricity rate increase factors for next year are reflected quarterly in a 'high front, low back' (jeongobujeo) manner, operating profit is expected to record a surplus of 1.9 trillion won; however, if evenly distributed quarterly, the annual deficit is projected to reach 1.3 trillion won. If the increase factors for next year are evenly distributed quarterly over three years, the operating deficit for next year is expected to expand to 14.3 trillion won.

The Ministry and KEPCO proposed a plan to turn to a surplus in 2023 or 2024 through rate normalization and cost minimization efforts, then eliminate accumulated deficits in 2025?2026, and normalize management by the end of 2027.

Additionally, the Ministry proposed raising gas rates next year by at least 8.4 won per megajoule (MJ) (2.1 won each quarter) or up to 10.4 won (2.6 won each quarter). This year, gas rates for residential use were raised four times (April, May, July, October) by a total of 5.47 won. Next year, gas rates would increase by at least 1.5 times and up to 1.9 times this year's increase.

The Ministry and the corporation analyzed that if rates are raised by 8.4 won per MJ next year, unpaid balances could be resolved starting in 2027, and if raised by 10.4 won, starting in 2026.

An electricity meter is installed in a residential area in Dobong-gu, Seoul, on the 30th, ahead of Korea Electric Power Corporation's announcement of the fuel cost adjustment unit price for electricity rates in the fourth quarter. Photo by Jinhyung Kang aymsdream@