"Maintaining +5 Won in Consideration of KEPCO's Financial Situation"
Frozen for 14 Consecutive Quarters
Amid the prolonged heatwave this year and the ensuing controversy over the "electricity bill bomb," the government began reviewing electricity rate hikes on the 23rd. An electricity meter is installed in a commercial building in Seoul. Photo by Kang Jinhyung
The government has decided to freeze electricity rates for the fourth quarter (October to December). Although there was some room to lower the fuel cost adjustment rate due to the relative stabilization of international energy prices, the accumulated debt of Korea Electric Power Corporation (KEPCO) and the scale of unadjusted rates remained significant burdens. As a result, the fuel cost adjustment rate will remain frozen for the 14th consecutive quarter since the third quarter of 2022, and general electricity rates will be frozen for the 10th consecutive quarter.
According to the Ministry of Trade, Industry and Energy and KEPCO on the 22nd, electricity rates consist of a basic charge, an energy charge, a climate and environment charge, and a fuel cost adjustment charge. Of these, the fuel cost adjustment charge is calculated quarterly based on the international prices of bituminous coal, liquefied natural gas (LNG), and heavy oil over the previous three months.
For the fourth quarter of this year, the calculated actual fuel cost was 404.21 won per kilogram, which is lower than the standard fuel cost of 494.63 won per kilogram. In theory, this would have resulted in a reduction factor of -12.1 won per kilowatt-hour. However, due to the upper and lower limit regulations stipulated in the electricity supply contract, the final rate was maintained at +5 won.
The government explicitly cited KEPCO’s financial structure in explaining this decision. The Ministry of Trade, Industry and Energy stated, "Considering KEPCO’s financial situation and the scale of unadjusted rates, the fuel cost adjustment rate for the fourth quarter of 2025 has been set at +5 won, the same as the previous quarter," and added, "Please ensure smooth implementation and continue self-rescue efforts for management normalization."
Political factors are also believed to have played a role. Recently, President Lee Jaemyung mentioned the need to adjust electricity rates to reflect reality, but there were concerns that raising rates ahead of the Chuseok holiday could increase the burden of living costs. The government appears to have chosen a direction that maintains price stability while minimizing the perceived burden on the public.
However, there are concerns that the prolonged rate freeze is making it increasingly difficult for KEPCO to restore its financial soundness. Since 2021, KEPCO has suffered heavy losses due to the surge in global fuel prices, with total debt surpassing 200 trillion won this year. Although some of the rate increases have been reflected in recent years, allowing KEPCO to post an operating profit of 8.3 trillion won last year and return to the black for the first time in four years, the financial burden has not yet been resolved.
The market expects a high possibility of a rate hike early next year. This is because KEPCO’s financial capacity must support large-scale power grid investments, such as the government’s ongoing "energy highway" project. With KEPCO’s bond issuance limit falling short of 20 trillion won, it is seen as difficult to carry out the necessary investments without normalizing electricity rates.
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