Electricity Rates Likely Frozen in Q1 Next Year... KEPCO Maintains Fuel Cost Adjustment Unit Price at 5 Won per kWh (Update)

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There is a high possibility that electricity rates will be frozen at the current level in the first quarter of next year. This is because the fuel cost adjustment unit price, which is adjusted quarterly, has been maintained at 5 won per kWh.

Korea Electric Power Corporation (KEPCO) announced on the 23rd that the fuel cost adjustment unit price for January to March next year will be maintained at 5 won per kWh, the same as applied in the fourth quarter of this year.

An electric meter is installed in a commercial building in Seoul. Photo by Kang Jin-hyung

Electricity rates consist of a basic charge, power consumption charge, climate environment charge, and fuel cost adjustment charge. The fuel cost adjustment unit price announced on this day serves as the calculation basis for the fuel cost adjustment charge. It is a fine adjustment of electricity rates that occurs automatically every three months.

The adjustment unit price is determined by reflecting the changes in fuel costs, such as bituminous coal and liquefied natural gas (LNG), which are the production costs of electricity, over the three months prior to the relevant quarter. According to KEPCO, considering this, the fuel cost adjustment unit price to be applied in the first quarter of next year should have been '-5.1 won' per kWh, but the government instructed to maintain the maximum rate of 5 won, taking into account KEPCO's severe financial situation. KEPCO has been applying the maximum rate of 5 won regardless of international fuel costs since the third quarter of 2022.

A KEPCO official explained, "The government notified that the fuel cost adjustment unit price for the first quarter of next year will continue to be applied at 5.0 won, the same as the fourth quarter of this year, considering KEPCO's financial situation and the significant amount of unadjusted fuel cost adjustment charges. The government also urged thorough implementation of self-help efforts for KEPCO's management normalization."

By maintaining the fuel cost adjustment charge at 5 won for the first quarter of next year and not separately raising the other charges such as the basic charge, power consumption charge, and climate environment charge, electricity rates will effectively be frozen in the first quarter of next year. Considering the recent domestic political turmoil, including emergency martial law and impeachment situations, it is highly likely that electricity rate adjustments will not be made.

Previously, KEPCO has incurred massive debt due to selling electricity below production costs. As of the end of the first half of this year, KEPCO's total consolidated debt amounts to 202.99 trillion won, with accumulated deficits totaling 48 trillion won.