Gas Prices to Rise Again in July... Gas and Electricity Rates to Increase Together in October

Electricity Rates to Rise Simultaneously Next Month with Q3 Increase
Sharp Raw Material Cost Surge Due to Higher LNG Import Prices

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Dongwoo Lee] Gas prices are set to rise again in July this year, increasing the burden on households and self-employed individuals. In particular, a simultaneous increase in gas and electricity prices is scheduled for October. If electricity prices also rise through the fuel cost linkage system in the third quarter (July to September), both public utility rates will be increased together next month.

According to the Ministry of Trade, Industry and Energy and Korea Gas Corporation on the 13th, from next month, the raw material cost adjustment unit price for residential and general-use gas will increase by 0.67 KRW to 1.90 KRW per megajoule (MJ, unit of gas heat quantity) compared to the previous rate.

City gas prices consist of the 'raw material cost' (standard raw material cost + adjustment unit price), which is the import price of liquefied natural gas (LNG) used as fuel for power generation, and the 'retail supply cost,' which includes the supply cost and investment returns of retail suppliers. This time, the adjustment unit price of the raw material cost is being raised.

The adjustment unit price was raised from 0 KRW to 1.23 KRW in May and is scheduled to increase further by 0.40 KRW from 1.90 KRW to 2.30 KRW in October.

The reason for the increase in the adjustment unit price is the sharp rise in raw material costs due to the increase in LNG import prices. To stabilize prices, the government suppressed price hikes, resulting in Korea Gas Corporation's accumulated unpaid receivables (losses) reaching 1.8 trillion KRW by the end of last year. Usually, accumulated unpaid receivables are recovered by raising the adjustment unit price the following year.

To avoid a sudden increase in the adjustment unit price that would heavily burden the public, the timing of the increase was divided into three phases. Earlier in April, the standard raw material cost linked to fuel costs was also raised by an average of 1.8% (based on Seoul city retail prices, excluding VAT). The increase rates were 3.0% for residential use, 1.2% for general use (business use 1) applied to restaurants, cafeterias, beauty salons, lodging facilities, swimming pools, etc., and 1.3% for general use (business use 2) applied to bathhouses, waste incineration plants, etc.

The problem is that, following April, electricity prices are also scheduled for an additional increase in October.

The government had previously decided to raise the standard fuel cost for electricity prices by 4.9 KRW per kWh (kilowatt-hour) twice, in April and October, totaling 9.8 KRW, and separately increased the climate environment charge by 2 KRW to 7.3 KRW in April.

Additionally, Korea Electric Power Corporation (KEPCO), considering the massive deficit caused by the surge in fuel costs, plans to submit a proposal for the third-quarter electricity price increase to the government on the 16th. Electricity prices consist of basic charges, electricity consumption charges (standard fuel cost), climate environment charges, and fuel cost adjustment charges, and KEPCO intends to request an increase in the fuel cost adjustment unit price, which is discussed quarterly.

Depending on the government's decision, the possibility of an additional electricity price increase next month remains open. KEPCO recorded an operating loss of 7.7869 trillion KRW in the first quarter alone, already exceeding last year's total deficit of 5.8601 trillion KRW. The securities industry has warned that KEPCO's deficit could increase to 30 trillion KRW this year.

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