Government-Suppressed 'Electricity and Gas Prices' to Rise One After Another Starting April Next Year, After the Presidential Election (Comprehensive)

KEPCO Confirms and Announces 2022 Standard Fuel Cost and Climate Environment Charges
Standard Fuel Cost Increase of 9.8 KRW/kWh, Reflected in April and October
Climate Environment Charge Increase of 2 KRW/kWh, Applied from April
Increase of 1,950 KRW for a Four-Person Household

KOGAS Adjusts Residential Raw Material Cost Settlement Price in Phases
Monthly Average Burden Increases by a Total of 4,600 KRW until October

(Photo) [Image source=Yonhap News]

[Sejong=Asia Economy Reporter Joo Sang-don] From April next year, after the '20th Presidential Election,' electricity rates and residential city gas rates will be raised one after another. According to government policy, electricity and gas rates, which had been restrained from increasing, will rise immediately after the presidential election.

First, Korea Electric Power Corporation (KEPCO) decided to raise electricity rates starting from April next year. This reflects the increase in international fuel prices and climate/environmental costs, but considering the public burden amid prolonged COVID-19 difficulties, the adjustment timing was spread out after April next year.

On the 27th, KEPCO confirmed and announced the 2022 standard fuel cost and climate environment charges. The standard fuel cost will be increased by 9.8 KRW/kWh in two phases (4.9 KRW/kWh in April and 4.9 KRW/kWh in October), and the climate environment charge will be increased by 2.0 KRW/kWh, applied from April 1.

The fuel cost linkage system reflects changes in actual fuel costs compared to the standard fuel cost. The 2022 standard fuel cost is calculated based on the period from December 2020 to November 2021, which is the most recent year. During this period, the price of bituminous coal rose from 120 KRW/kg to 145 KRW/kg, a 20.6% increase; natural gas increased by 20.7%; and BC oil by 31.2%, resulting in a 9.8 KRW/kWh increase in the 2022 standard fuel cost compared to 2021.

A KEPCO official stated, "Considering that applying the entire 9.8 KRW/kWh increase in the 2022 standard fuel cost at once would sharply increase the public burden, we decided to reflect it gradually in the electricity rates in two phases in April and October 2022." He added, "The fuel cost adjustment rate for the first quarter of 2022, which received a government hold notice on the 19th, remains unchanged at 0 KRW/kWh."

The climate environment charge has been separately billed since January 2021 to transparently provide information on climate and environmental costs. Reflecting the annual costs of 2021, the unit price will be adjusted from 5.3 KRW/kWh to 7.3 KRW/kWh starting April 1, 2022. This is a 2 KRW/kWh increase compared to the current rate. KEPCO explained that this is due to an increase in the Renewable Portfolio Standard (RPS) mandatory supply ratio (from 7% to 9%), an increase in the paid allocation ratio of greenhouse gas emission permits (from 3% to 10%), and the implementation of coal power generation upper limit restrictions.

This electricity rate adjustment is expected to result in about a 5.6% increase in electricity rates in 2022. For a four-person household using residential electricity (average monthly usage of 304 kWh), the monthly electricity bill is expected to increase by approximately 1,950 KRW (due to the increase in standard fuel cost and climate environment charges).

Residential city gas rates will also increase in April next year. Korea Gas Corporation (KOGAS) resolved on the 27th the adjustment plan for the 2022 residential raw material cost settlement price in accordance with the raw material cost linkage system implementation guidelines.

With this adjustment, KOGAS plans to gradually adjust the 2022 residential raw material cost settlement price, which applies from May 2022 to April 2023, by 2.3 KRW/MJ in three phases.

A KOGAS official explained, "Currently, the raw material cost linkage system implementation guidelines stipulate that the accumulated raw material cost losses (uncollected amounts) as of the end of 2021 are to be recovered through the raw material cost settlement price over one year starting May 2022." He added, "However, following government policy to prevent concentrated price hikes in specific quarters and to avoid sudden increases in public burden, KOGAS decided to spread the adjustment factors for the settlement price throughout the year."

Due to this city gas rate adjustment, KOGAS expects that for an average monthly usage of 2,000 MJ, the consumer's monthly average burden will increase by 2,460 KRW in May next year, 1,340 KRW in July, and 800 KRW in October, totaling 4,600 KRW.

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