[2022 National Audit] KEPCO President: "No Way to Avoid Deficit... Need to Introduce SMP Cap System"

Jung Seung-il President "Fuel Costs Hit Record High... Unprecedented Measures Needed"

President Jeong Seung-il of Korea Electric Power Corporation answering
(Naju=Yonhap News) Reporter Cho Namsu = Jeong Seung-il, President of Korea Electric Power Corporation, is answering during the National Assembly inspection by the Industry, Trade, Energy, Small and Medium Venture Business Committee held at the Korea Electric Power Corporation headquarters in Naju, Jeollanam-do on the morning of the 11th. 2022.10.11
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[Asia Economy Sejong=Reporter Lee Jun-hyung] Jeong Seung-il, CEO of Korea Electric Power Corporation (KEPCO), cited the 'surge in fuel costs' as the main cause of the record-breaking deficit. He also emphasized the need to introduce a 'cap on the System Marginal Price (SMP)'.

At the National Assembly's Industry, Trade, Energy, Small and Medium Business Committee's audit held on the 11th at KEPCO headquarters in Naju, Jeonnam Province, Jeong said, "Today, the SMP has exceeded 270 KRW per kWh, reaching an all-time high." He added, "Normally, SMP is around 70 KRW, so purchasing electricity at about four times that price means there is no way to avoid losses under these circumstances."

The SMP is the price at which KEPCO buys electricity from power producers. When electricity rates remain the same, an increase in SMP worsens KEPCO's deficit. According to the Korea Power Exchange, SMP temporarily rose to 288.65 KRW per kWh on that day, nearly three times higher than last year's average SMP of 94.34 KRW.

This is why the government is planning to introduce an SMP cap system. The aim is to limit the increase in SMP caused by fuel cost fluctuations to minimize KEPCO's losses. The Ministry of Trade, Industry and Energy initially planned to implement the SMP cap system starting in August, but postponed the introduction indefinitely due to opposition from private power producers.

There are also calls for KEPCO to actively support the introduction of the SMP cap system. Lee Jang-seop, a member of the Democratic Party of Korea, said on the same day, "KEPCO's position on the SMP cap system should be clear," adding, "Since electricity is a public good, market logic should not be applied." This is interpreted as a rebuttal to the private power industry's stance, which labeled the SMP cap system as an 'anti-market policy.'

CEO Jeong also expressed support for the SMP cap system. He said, "Exceptional situations require exceptional measures," but noted, "Some renewable energy operators and combined heat and power producers have concerns." He added, "The government is listening to opinions thoroughly and cooperating with related ministries," and "We are continuously explaining the necessity of the SMP cap system."

Jeong also mentioned KEPCO's plan to sell overseas assets. To improve its financial structure, KEPCO plans to dispose of assets worth 1.5447 trillion KRW, including overseas coal power plants. Jeong explained, "We have declared that we will not undertake new overseas coal power projects," and described this as "a process of reallocating overseas assets accordingly." He said, "We are selecting sale targets after thoroughly reviewing the possibility of sales," and added, "We will do our best to protect businesses related to our core competencies."

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