Gas Corporation Accelerates 'LNG Individual Pricing Plan' Implementation... "Factor for Electricity Rate Reduction"

Expectations for Supply Rationalization and Electricity Rate Stability
Organizational Expansion and Reorganization for 2022 Implementation
Lower Power Generation Costs Lead to Rate Stabilization
Supports National-Level Volume Management
Removes Purchase Barriers for Small Companies

Exterior view of the Korea Gas Corporation headquarters building. (Photo by Korea Gas Corporation)

[Asia Economy Reporter Moon Chaeseok] Korea Gas Corporation is accelerating the introduction of the 'Liquefied Natural Gas (LNG) Individual Pricing System' in 2022. Gas Corporation expects that by introducing the 'Individual Pricing System,' it will be able to rationalize the supply system and stabilize electricity prices.

On the 20th, Gas Corporation announced that it expanded and reorganized the responsible organization earlier this year and strengthened marketing responses to enable the implementation of the 'Individual Pricing System for Power Generation' starting in 2022.

They are continuously discussing improvements from the existing 'Average Pricing System' to the Individual Pricing System by forming consultative bodies with stakeholders such as power generation companies and associations.

Gas Corporation plans to officially implement the Individual Pricing System for new power generators or those whose sales contracts with Gas Corporation are completed after January 1, 2022.

A Gas Corporation official stated, "As natural gas demand is expected to increase due to the government's energy transition policy, domestic power generation companies' direct import demand has increased, raising issues regarding integrated supply and demand management at the national level and the establishment of a fair competition structure among power companies."

Source=Korea Gas Corporation

Under the existing Average Pricing System, Gas Corporation averaged all LNG procurement contract prices and supplied LNG to all power companies at the same price. In contrast, the Individual Pricing System allows each power company to enter into LNG supply contracts tailored to the circumstances of their own power generators.

When a power company applies for gas supply to Gas Corporation, the corporation procures gas from overseas sellers according to the power company's requirements and provides facilities such as gas, storage tanks, and pipelines to the power company.

With the expected increase in natural gas demand due to energy transition policies, domestic power companies' needs for direct LNG imports have grown. Additionally, issues regarding integrated supply and demand management at the national level and the establishment of a fair competition structure among power companies have been raised.

According to Gas Corporation, after the introduction of the Individual Pricing System, power companies will be able to receive LNG from the corporation at different prices, which is expected to reduce the cost of LNG power generation. If competition among power companies to lower fuel costs intensifies, LNG power generation costs could be further reduced. As power companies reduce costs in this way, electricity prices can be stabilized.

A Gas Corporation official said, "We expect that the introduction of the Individual Pricing System will contribute to the stabilization of electricity prices and ultimately enhance public benefits."

The Individual Pricing System also helps efficiently integrate and manage LNG volumes at the national level. With the introduction of the Individual Pricing System, the corporation can integrate and manage LNG volumes for power companies and establish a system to stock an appropriate amount.

A Gas Corporation official explained, "While direct import volumes are difficult to manage at the national level, the corporation can manage volumes integrally and stock an appropriate amount of LNG through the Individual Pricing System," adding, "This enhances the ability to respond to national emergencies such as sudden surges in electricity demand."

The entry barriers for small-scale power companies to purchase LNG are also expected to be lowered. Previously, they could purchase LNG at the same price as large-scale power companies, but after the introduction of the Individual Pricing System, if the corporation participates as a supplier in the LNG procurement market for power companies, LNG procurement will become easier.

Improvements in Gas Corporation's LNG supply system are also expected to support the government's eco-friendly energy expansion policies. The government announced last May that it plans to retire 30 out of 60 coal-fired power plants by 2034 and replace 24 of them with LNG power generation.

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