Ahead of the Peak Summer, Q3 Electricity Rates Frozen... Fuel Cost Adjustment Unit Maintained at +5 Won

Electricity rates for the third quarter (July to September), when cooling demand surges due to the operation of air conditioners and other devices, have been frozen at the current level.

Korea Electric Power Corporation (KEPCO) announced on the 21st that it will maintain the fuel cost adjustment unit price at 5 won per kilowatt-hour (kWh), the same as the current rate, for the third quarter of this year.

As Korea Electric Power Corporation prepares to actively discuss electricity rate hikes to resolve its deficit, an electric meter is installed in a commercial building in Seoul on the 7th. Photo by Jinhyung Kang aymsdream@

The fuel cost adjustment unit price is determined within a range of ±5 won per kWh, reflecting the fuel cost fluctuations of bituminous coal and liquefied natural gas (LNG) over the three months prior to the relevant quarter. Currently, the maximum rate of '+5 won' is applied. The fuel cost adjustment fee is calculated by multiplying the fuel cost adjustment unit price by the amount of electricity used.

Electricity rates consist of a basic charge, energy charge, climate environment charge, and the fuel cost adjustment fee announced this time. The fuel cost adjustment fee is announced by the 21st of the month immediately preceding the start of each quarter.

The power authorities have frozen the fuel cost adjustment fee at the current level for the third quarter and have not separately increased the other charges such as the basic charge, energy charge, and climate environment charge, resulting in the overall electricity rates being frozen for the third quarter.

A KEPCO official stated, "Considering KEPCO's financial situation and the significant amount of unadjusted fuel cost adjustment fees, we have been notified by the government to continue applying 5.0 won, the same as in the second quarter of this year," adding, "We will also thoroughly implement self-help efforts for management normalization."

KEPCO is carrying a cumulative deficit of around 43 trillion won. As of the end of March this year, KEPCO's total debt stood at 200.9 trillion won, and if the debt is not reduced, it will have to pay 4 to 5 trillion won annually in interest.

Meanwhile, the government views the summer season, when heating use is low, as the appropriate time to adjust city gas rates, which are still supplied at about 80% of cost. Discussions among related ministries are underway regarding whether to raise city gas rates on July 1.