KEPCO Reports First Half Deficit of 14.3 Trillion Won Due to Soaring Fuel Costs (Breaking News)

Sales of about 32 trillion won in the first half of this year... Operating expenses 46.3 trillion
SMP doubled in one year... Fuel and power purchase costs also increased by 16.5 trillion
KEPCO "Threat to power ecosystem... Need for cost-based electricity rates"

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Lee Jun-hyung] Korea Electric Power Corporation (KEPCO) posted a loss exceeding 14.3 trillion won in the first half of this year alone. This was the result of electricity rates failing to keep pace with the rise in fuel costs such as international oil prices.

KEPCO announced on the 12th that its operating loss for the first half of this year was 14.3033 trillion won. Considering that KEPCO recorded a loss of 187.3 billion won in the first half of last year, the operating loss increased more than 76 times in just one year. Sales amounted to 31.9921 trillion won, an 11.5% increase compared to the same period last year (28.6848 trillion won), but operating expenses rose by 60.3% to 46.2954 trillion won.

KEPCO’s record-breaking loss was due to the sharp rise in fuel costs since the beginning of this year. According to KEPCO, the price of thermal coal in the first half of this year soared 221.7% to $318.8 per ton compared to $99.1 per ton in the same period last year. During the same period, the price of liquefied natural gas (LNG) jumped 132.7% from 577,700 won per ton to 1,344,100 won per ton. Consequently, the electricity wholesale price (SMP), which is the price KEPCO pays to power producers for electricity, increased by 117.1% to 169.3 won per kWh in the first half of this year compared to 78 won in the same period last year.

This explains why KEPCO’s fuel and electricity purchase costs increased by 16.5 trillion won (95.9%) over the past year in the first half of this year. Specifically, fuel costs for subsidiaries rose by 6.8239 trillion won, and electricity purchase costs from private power producers increased by 9.6875 trillion won. A KEPCO official explained, “Electricity demand increased, leading to higher power generation, and with the sharp rise in fuel prices such as coal and LNG, the SMP more than doubled in one year.”

On the other hand, KEPCO’s electricity sales revenue increased by only 2.5 trillion won (9.3%) compared to the first half of last year. This was because the government did not properly reflect the fluctuations in fuel costs in electricity rates for the sake of stabilizing people’s livelihoods. In fact, although KEPCO’s fuel costs increased by 14.8 won and 33.8 won per kWh in the first and second quarters of this year respectively, the government froze the fuel cost adjustment rate increase at 0 won. KEPCO estimates that if the government had raised the fuel cost adjustment rates by 3 won and 5 won per kWh in the first and second quarters respectively, electricity sales revenue in the first half of this year would have increased by about 1.1 trillion won.

KEPCO insists that cost-based electricity pricing is urgently needed. This is because reflecting fluctuations in fuel costs such as international oil prices in electricity rates in a timely manner is essential to reduce losses. Another KEPCO official said, “The large loss in the first half of the year was caused by insufficient reflection of cost fluctuations due to rising international fuel prices in electricity rates,” adding, “(KEPCO’s loss) is not only a matter of individual corporate management deterioration and survival but can also pose a threat to the entire national power ecosystem.”

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