"Losing 60 Won Per Sale"... KEPCO Records Largest Ever 'Negative Margin'

Average Deficit of 62.7 Won per kWh
Monthly Loss of 2.67 Trillion Won
November Corporate Bonds Exceed 1.5 Trillion Won

[Image source=Yonhap News]

Korea Electric Power Corporation's (KEPCO) loss per kWh from electricity sales has exceeded 60 won for the first time this year. As winter electricity demand begins to surge in earnest, the losses from electricity sales are expected to increase further, leading to a larger-than-anticipated cumulative deficit burden for KEPCO.

According to the energy industry on the 16th, KEPCO purchased electricity at an average of 179.2 won per kWh and sold it at 116.5 won per kWh as of September. This means KEPCO incurred a loss of 62.7 won per kWh on electricity sales. This figure surpasses the previous loss of 52.7 won recorded in March, marking a new high in six months. As the negative margin structure, where losses increase with more electricity sales, surged to over 60 won per kWh, KEPCO's electricity sales deficit reached 2.6741 trillion won during the same period, an increase of about 210 billion won (8.6%) compared to the previous month (2.4618 trillion won).

KEPCO's electricity sales loss per kWh peaked at 23.5 won in January, 47.3 won in February, and 52.7 won in March, then gradually decreased from April. In June, KEPCO purchased electricity at 109.5 won and sold it at 122.0 won, making an average profit of 12.5 won per kWh for the first time this year. However, with the rise in electricity demand during the summer, the System Marginal Price (SMP) sharply increased, causing losses in August to rise again to the 40 won per kWh range.

KEPCO's electricity sales price typically ranges between 100 and 110 won per kWh, with average prices rising during summer and winter to curb demand. The average electricity sales price from June to August this year was 129.1 won, about 20 won higher, for the same reason.

The problem is that the SMP has risen faster than the sales price, causing the negative margin structure to persist year-round regardless of the season. The SMP, which serves as the benchmark price for KEPCO's electricity purchases from power producers, reached 252.33 won on the mainland last month, an 8.3% increase from the previous month’s 232.82 won.

The deficit caused by the entrenched negative margin structure is accumulating as debt. KEPCO is issuing corporate bonds to mitigate the worsening financial situation caused by unprecedented large-scale deficits. This year alone, KEPCO has issued corporate bonds exceeding 25.45 trillion won as of mid-month. Although the government recently urged restraint in bond issuance, citing the negative impact of KEPCO’s bonds on the financial market flow following the Legoland incident, KEPCO issued corporate bonds worth 1.55 trillion won this month.

The Ministry of Trade, Industry and Energy is considering raising electricity rates ahead of the first quarter of next year due to the increasing deficit burden on KEPCO. The ministry is currently reviewing the detailed unit prices of electricity rates to be applied from January next year, with a focus on raising the key component of electricity rates, the standard fuel cost. Experts predict that KEPCO will need to implement a phased increase averaging around 50 won per kWh to normalize rates.

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