Finally, Electricity Rate Reform?…KEPCO to Hold Board Meeting on the 26th

KEPCO "Will Announce Position in June in Any Form"

[Asia Economy Reporter Moon Chaeseok] Korea Electric Power Corporation (KEPCO) is expected to unveil the outline of its electricity rate reform plan this month. Industry consensus is that now is a golden opportunity, as the first quarter operating profit turned positive for the first time in three years due to the impact of low oil prices.

According to the industry on the 9th, KEPCO will hold a board meeting at the Art Center in Yangjae-dong on the 26th. Whether the electricity rate reform plan will be submitted as an agenda item is the key issue.

To reform electricity rates, approval from the board of directors and final authorization from the Ministry of Trade, Industry and Energy are required.

Regardless of whether the reform plan is submitted, it is highly likely to include reasonable improvements to the essential usage guarantee discount system and the introduction of seasonal and time-of-use rates for residential customers.

The essential usage guarantee discount system provides a discount of 4,000 KRW per month for general households and 2,500 KRW per month for apartments using less than 200 kWh per month.

The seasonal and time-of-use rate for residential customers refers to a rate system that differentiates electricity charges by season and time of day.

A KEPCO official said, "It has not yet been decided whether the electricity rate reform plan will be submitted as an agenda item at the board meeting later this month."

KEPCO's electricity rate system reform goes hand in hand with improving its financial structure.

KEPCO posted operating losses of 208 billion KRW in 2018 and 1.2765 trillion KRW last year. Last year’s loss was the largest in 11 years since 2.798 trillion KRW in 2008. Despite posting a 430.6 billion KRW profit in the first quarter due to falling oil prices and fuel cost reductions, it is not yet time to be complacent.

KEPCO is selling electricity at prices lower than its cost. CEO Kim Jong-gap even mentioned the need for electricity rate reform, saying, "Tofu (electricity) is cheaper than soybeans (raw materials)." For this reason, KEPCO aims to reform the electricity rate system into a transparent and predictable cost-based structure.

The problem is that discussions on rate reform have not gained momentum due to difficulties faced by households and industries amid the COVID-19 pandemic.

Adjusting industrial nighttime rates is unlikely to be realized due to opposition from the industrial sector. A survey conducted last month by the Korea Federation of Small and Medium Business of 300 small and medium manufacturers found that 94.7% of respondents were concerned that raising nighttime rates would increase production costs and reduce price competitiveness. Many companies even requested a rate reduction.

The Ministry of Trade, Industry and Energy is reportedly not considering the introduction of a fuel cost linkage system. According to KEPCO’s disclosure, it is not mandatory to submit the reform plan by the end of this month, and there are voices suggesting that further review may be possible.

This content was produced with the assistance of AI translation services.