August Wholesale Electricity Prices Surge... KEPCO Faces Larger Deficits Even with Rate Hikes

Internal SMP Data Distributed to Employees on the 1st
SMP 199.7 Won... Calorie Unit Price Soars

[Asia Economy Sejong=Reporter Dongwoo Lee] The electricity wholesale price (SMP), which Korea Electric Power Corporation (KEPCO) uses as the standard for purchasing electricity from power producers, has surged again after three months, raising concerns about an expanded deficit in the third quarter of this year.

According to KEPCO on the 2nd, as of the previous day, the SMP was 199.7 KRW per kWh, a 112.2% increase compared to the same month last year (94.1 KRW). Compared to the previous month (151.9 KRW), the price rose by 31.5% within a month. This is the average value combining the mainland SMP (200.2 KRW per day) and regions such as Jeju.

As the SMP surged, KEPCO distributed confidential materials including this information to internal employees. This is due to growing concerns that despite KEPCO's implementation of self-help measures after recording the "worst deficit" in the first half of this year, the deficit could unexpectedly increase. A KEPCO official explained, "We understand that the materials were distributed for internal reference as the SMP curve suddenly rose this month."

The background of the SMP surge is that Russia weaponized the gas pipeline to Europe, causing liquefied natural gas (LNG) prices to rise sharply amid increased demand. According to Korea Gas Corporation, the LNG calorific unit price increased by 39.6%, from 91,017 KRW per gigacalorie (Gcal) last month to 127,096 KRW this month.

As the calorific unit price rises, the fuel cost per kWh, which is the cost of producing electricity per kWh, also increases proportionally. This month, the LNG fuel cost per kWh rose to 213.85 KRW, up 56.9 KRW (36.2%) from the previous month (156.90 KRW), and all power generation fuels except nuclear power showed an upward trend, including oil at 428.34 KRW (9.9%↑) and bituminous coal at 130.54 KRW (15.2%↑).

Ultimately, KEPCO’s deficit in the third quarter is expected to grow further due to the surge in SMP. Considering KEPCO’s average electricity sales price was raised by 5.0 KRW in the third quarter to between 100 and 105 KRW, it means a loss approaching about 100 KRW per kWh.

The forecasted peak electricity demand next week is also a burden. As electricity demand increases, KEPCO’s electricity purchase costs also rise. The daily peak electricity demand this summer reached a record high of 92,990 MW (megawatts) on the 7th of last month. With the recent end of the monsoon and the start of intense heat, the possibility of breaking the peak next week is increasing.

An official from the securities industry said, "KEPCO’s consensus operating deficit for the third quarter is 4.8788 trillion KRW, but the deficit could increase further due to the surge in SMP."

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