SMP Hits Another All-Time High... Third Time This Month

On the 19th, when the announcement on the electricity rate hike was imminent, an electric meter installed in a residential area in Seoul was seen. As prices of essential goods and energy soar across the board, and public utility charges such as electricity, water, and gas increase, these have become major factors driving rapid inflation, deepening concerns among inflation authorities. If the government accepts Korea Electric Power Corporation's request for an electricity rate hike, there are concerns that the consumer price inflation rate, which has already recorded the mid-5% range, could exceed 6%. Photo by Hyunmin Kim kimhyun81@

[Asia Economy Sejong=Reporter Dongwoo Lee] The domestic electricity wholesale price (SMP) has set a new record high three times this month. Amid the continued rise in international energy prices, concerns are emerging that Korea Electric Power Corporation's (KEPCO) financial structure could worsen further in the second half of this year, as it faces losses the more electricity it sells.

According to the Korea Power Exchange on the 9th, the SMP on the 6th reached 246.68 KRW per kWh (kilowatt-hour), breaking the previous record set just four days earlier. On the 1st of this month, the SMP was 228.96 KRW per kWh, and on the 2nd, it rose to 245.42 KRW, consecutively setting new all-time highs since the establishment of the Korea Power Exchange in 2001.

The recent sharp rise in SMP is attributed to the LNG calorific unit price, which has been hitting record highs daily. According to the Korea Power Exchange, the calorific unit price of Korea Gas Corporation this month is 144,634 KRW, up 13.8% from the previous month (127,069 KRW). Compared to June (77,662 KRW), it has nearly doubled, increasing by 86.3%.

Following the Western countries' agreement to implement sanctions such as the price cap on Russian crude oil, Russia retaliated by completely halting natural gas supplies to Europe, driving energy prices higher.

The problem is that if heating demand increases significantly during the winter, coupled with LNG demand, SMP could rise further. KEPCO's financial burden from selling electricity is inevitably expected to increase. Financial information firm FnGuide forecasts KEPCO's annual operating loss consensus (average securities market forecast) for this year at 28.8423 trillion KRW, with the annual debt ratio expected to rise from 223.2% last year to 397.4% this year.

KEPCO plans to raise the fuel cost component of electricity rates by 4.9 KRW per kWh next month. Some speculate that the increase could be higher than initially announced.