Korea Electric Power Corporation (KEPCO) announced on the 21st that it will maintain the fuel cost adjustment unit price for the fourth quarter of this year (October to December) at 5 won per kilowatt-hour (kWh), the same as the previous quarter. Since electricity rates consist of a basic charge, electricity consumption charge (standard fuel cost), climate and environmental charge, and fuel cost adjustment charge, there is still a possibility of an increase in electricity rates in the fourth quarter.
The fuel cost adjustment unit price, determined by the 21st of the month before each quarter begins, is calculated to flexibly reflect changes in fuel costs such as bituminous coal, liquefied natural gas (LNG), and bunker C oil (BC oil) over the three months prior to the relevant quarter in electricity rates. The fuel cost adjustment unit price is applied within a range of ±5 won per kWh, and the maximum rate of 5 won is already in effect.
A KEPCO official explained, "The fuel cost adjustment unit price for the fourth quarter was calculated by lowering 1.8 won per kWh due to a decline in international fuel prices, reflecting prices from 4 to 5 months ago when international fuel prices were lower than now. However, considering KEPCO's financial situation and the significant amount of unadjusted fuel cost adjustment charges, we were notified by the government to maintain the fuel cost adjustment unit price at 5 won, the same as the third quarter."
There is a possibility that electricity rates, which rose consecutively in the first and second quarters and were frozen in the third quarter, may increase in the fourth quarter. This is because KEPCO’s accumulated deficit has reached 47 trillion won, and the structure of losing money every time electricity is sold continues.
According to the Monthly Electricity Statistics Report, the electricity sales price to consumers in May was 138.8 won per kWh, exceeding the power purchase price from power plants of 132.4 won, escaping the negative margin structure for the first time in 10 months. However, the margin, which was over 31 won in June, sharply decreased to 7.2 won in July. Ultimately, KEPCO’s cumulative fuel purchase price from January to July this year was 154.5 won per kWh, still higher than the sales price of 148.9 won.
The recent rise in international oil prices is also a burden for KEPCO. When international oil prices rise, the fuel purchase price inevitably increases. A KEPCO official said, "Currently, international oil prices and others are rising sharply, so it is uncertain whether the actual fuel cost will decrease in the next quarter. Factors for rate increases to resolve the accumulated deficit remain regardless of the fourth quarter fuel cost unit price."
The government has taken a cautious stance on the possibility of electricity rate hikes. An official from the Ministry of Trade, Industry and Energy stated, "Only the fourth quarter fuel cost adjustment unit price announced by KEPCO has been frozen, and we plan to decide on whether to raise electricity rates after comprehensively reviewing various factors such as international oil prices. However, we do not review with a predetermined direction such as increase or freeze."
The decision on whether to raise electricity rates is expected to be made no earlier than after the Chuseok holiday. The Ministry of Trade, Industry and Energy said, "It is tight to decide on (electricity rate hikes) before October," but added, "We will review various factors and decide on electricity rate hikes later."
On the 15th, the government announced an adjustment plan to raise the electricity rate by 8 won per kWh starting tomorrow. An electricity meter is installed in a commercial building in Seoul. Photo by Jinhyung Kang aymsdream@
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