[Reporter’s Notebook] KEPCO Suffers Amid Hesitation Over Rate Hikes

"Today's meeting has been canceled. The schedule for tomorrow's planned meeting will be announced later."

This was a call received around 1 p.m. on the 2nd, last weekend, from an official at the Ministry of Trade, Industry and Energy. At 2 p.m. that day, the Ministry had planned to hold an emergency inspection meeting with the presidents of Korea Electric Power Corporation (KEPCO) and Korea Gas Corporation to prepare countermeasures following the government's delay in announcing electricity rate hikes. The Ministry intended to publicly disclose the accumulated deficits of these public enterprises and the inevitability of the rate increase in relation to the ruling party and government’s provisional suspension of energy rate hikes for the second quarter of this year, decided two days earlier on the 31st of last month.

The energy industry responded that the Ministry’s sudden cancellation of the originally planned schedule was quite unusual. The Ministry explained the cancellation by stating, "We judged it necessary to make a decision after comprehensively reviewing not only the financial status of public enterprises but also recent international energy prices and inflation trends." However, some analysts interpreted that it was quite uncomfortable for the government that the ministry in charge of energy public enterprises would take the lead in sending a message about the rate increase just two days after the ruling party and government decided to suspend the hike.

Regardless of the situation, the cancellation of this emergency inspection meeting left one clear message: discord among the ruling party, government, and ministries over energy rate hikes is growing. Until just before the ruling party and government temporarily suspended the rate increase, the Ministry of Trade, Industry and Energy was reportedly strongly advocating for a phased increase, warning of the risks of KEPCO’s deficits. The Ministry expressed concerns that if the rate hike is delayed, rapid bond issuance would be inevitable, which could burden the bond market again this year. If KEPCO bonds, rated AAA, flood the market, general companies would have to issue corporate bonds at higher interest rates. KEPCO has already issued 7.61 trillion won in corporate bonds from January this year to the 24th of last month, accumulating deficits.

On the other hand, there are concerns that public utility rate hikes could lead to inflation. This is based on the judgment that inflation could directly hit the burden on the low-income economy. Politicians also judged that if rates were raised prematurely, public opinion could worsen significantly, as seen in the heating cost shock earlier this year. There are voices that the recent decline in government approval ratings also influenced the decision. A ruling party official hinted, "The controversy over the working hours reform plan seems to have also affected this energy rate hike decision."

The core point is that energy price policy is nothing but a temporary measure without establishing a reasonable rate system reflecting the cost structure. The deficits of energy public enterprises caused by cheap electricity rates are ultimately debts that the public must repay. It is time to consider ways to alleviate the burden on vulnerable groups while promoting the realization of electricity rates.

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