KEPCO Faces Growing Pressure to Raise Electricity Rates in Q2 as Losses Widen with Increased Sales

Fuel Cost Linkage Adjustment Unit Price to be Submitted on the 16th of Next Month
Fuel Cost Surge Makes Maximum Limit Increase per kWh Inevitable

On the 23rd, amid the ongoing sweltering heat, a monitor displaying the current power supply status is installed in the lobby of the annex building of the Korea Electric Power Corporation Seoul Headquarters in Jung-gu, Seoul. Photo by Moon Honam munonam@

Korea Electric Power Corporation (KEPCO) is struggling as international oil prices soar ahead of the fuel cost adjustment rate calculation for the second quarter of this year. Although the wholesale electricity price that KEPCO purchases from power producers has reached its highest level in seven years, the electricity rate increase this year is only around 17 won per kWh (kilowatt-hour). This amount already reflects the maximum annual increase under the fuel cost linkage system (5.0 won per kWh). If the second quarter's rate increase under the linkage system is deferred, KEPCO's deficit is expected to grow even larger.

According to related government departments on the 16th, KEPCO plans to finalize the fuel cost linkage adjustment rate for the second quarter and submit it to the Ministry of Trade, Industry and Energy by May 16. KEPCO intends to finalize the second quarter fuel cost adjustment rate by aggregating data up to mid-next month, but as with the first quarter, an increase up to the quarterly maximum limit (3.0 won per kWh) is expected to be unavoidable.

The recent pressure to raise electricity rates stems from the sharp rise in prices of fuel used for electricity generation, such as thermal coal, liquefied natural gas (LNG), and bunker C oil, since the beginning of this year. According to the Ministry of Trade, Industry and Energy, the spot import price of LNG in January this year reached a record high of $1,136.68 per ton. Consequently, the monthly average wholesale electricity price has exceeded 200 won per kWh. The Korea Power Exchange reported that the average wholesale electricity price last month was 153.82 won per kWh on the mainland, but it surged 35.2% to 208.01 won per kWh this month.

However, some expect that the government will find it difficult to decide on a rate increase under the second quarter fuel cost linkage system. This is primarily because KEPCO is already scheduled to raise the base fuel cost by 4.9 won in April, and including additional increases under the linkage system could negatively impact the stability of citizens' livelihoods.

The presidential election results are also a variable. Since electricity rate increases are linked to election pledges, policy directions may change depending on the candidate. Considering that the government already froze electricity rates in the first quarter without reflecting the rise in power generation costs, this trend is expected to continue for the time being.

An official from the Ministry of Trade, Industry and Energy said, "Recently, international oil inventories have decreased and the worsening situation in Ukraine has caused fuel prices for power generation to soar," adding, "If a real electricity rate increase is not implemented, KEPCO's deficit could exceed 10 trillion won this year."

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