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[Image source=Yonhap News]

[Sejong=Asia Economy Reporter Kwon Haeyoung] Electricity rates for the first quarter of next year have been frozen. Although electricity rates should be raised due to the sharp rise in fuel costs, the government has once again exercised its veto power, citing "consideration of the living conditions of the people due to rising prices."

Korea Electric Power Corporation (KEPCO) announced on the 20th that it will apply a final fuel cost adjustment rate of 0 won per kWh for January to March next year. This is the same level as 0 won per kWh in the fourth quarter of this year.

The government and KEPCO introduced a "fuel cost linkage system" this year, which reflects quarterly increases or decreases in fuel costs in electricity rates. The electricity rates for the first quarter of next year are determined based on fuel costs from September to November. According to KEPCO, during this period, the price of thermal coal averaged 181.81 won per kg after tax, a 20.3% increase compared to the previous three months. Liquefied natural gas (LNG) was 832.43 won per kg, and BC oil was 661.27 won per kg, rising 38.4% and 15.1%, respectively.

KEPCO applied the maximum quarterly adjustment of 3 won per kWh and submitted it to the government on the 16th, but the government exercised its veto power and finalized the fuel cost adjustment rate for the first quarter of next year at 0 won per kWh.

The government explained the freeze by stating, "Although adjustment factors arose due to the sharp rise in international fuel prices, it is necessary to ensure the stability of people's lives amid the prolonged COVID-19 pandemic and high inflation rates."

As a result, despite the sharp rise in fuel costs that began earlier this year, electricity rates remain at the same level as last year before the introduction of the fuel cost linkage system. The government raised electricity rates by 3 won per kWh in the fourth quarter of this year for the first time since the system's introduction, but this was merely a restoration of the 3 won per kWh reduction made in the first quarter. According to KEPCO, the amount of electricity rate adjustment not made due to the veto of the linkage system is 29.1 won per kWh.

Accordingly, KEPCO, which is burdened with debt amounting to 142 trillion won, is expected to face increased financial pressure.

A KEPCO official stated, "We are calculating the standard fuel cost and climate environment charges to be applied next year and plan to consult with the government on ways to reflect these in the rates, taking into account the burden on the public."

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