KEPCO Welcomes Its First Politician Leader... Will Electricity Rates Rise in Q4?

KEPCO Board to Approve Appointment of President Kim Dong-cheol
Submission of 'Q4 Fuel Cost Adjustment Rate' to Ministry of Trade, Industry and Energy

Korea Electric Power Corporation (KEPCO) plans to hold an extraordinary general meeting of shareholders on the 18th to approve the appointment of Kim Dong-cheol, the sole candidate for the next president. If the agenda passes at the shareholders' meeting, the appointment will be finalized by the president following a recommendation from the Minister of Trade, Industry and Energy.

Former lawmaker Kim graduated from Seoul National University Law School and worked at the Korea Development Bank before entering politics, serving four terms (17th to 20th National Assembly) as a member of the National Assembly representing Gwangju. If Kim is finally appointed as president, he will become the first former politician to lead KEPCO since its establishment as a corporation in 1961, marking a first in 62 years.

[Image source=Yonhap News]

The top priority for the next KEPCO president is business normalization. According to the semi-annual report, as of the end of June this year, the total consolidated debt stands at 201.4 trillion KRW, surpassing 200 trillion KRW for the first time in history. KEPCO's debt was around 132.5 trillion KRW at the end of 2020 but surged to 145.8 trillion KRW at the end of 2021 and 192.8 trillion KRW at the end of 2022.

Since the second quarter of last year, KEPCO has raised electricity rates nearly 40% over five separate occasions. However, due to the inability to keep pace with the rising international energy prices, the company’s financial structure has deteriorated as selling more electricity resulted in losses. KEPCO recorded operating losses again in the second quarter of this year, marking nine consecutive quarters of deficits. The accumulated operating losses since 2021 exceed 47 trillion KRW.

KEPCO views electricity rate hikes as unavoidable to resolve the massive accumulated deficit. Based on the 'Fuel Cost Adjustment Unit Price Calculation Details' derived from the prices of bituminous coal and liquefied natural gas (LNG) over the past three months, KEPCO proposed a 10.2 KRW per kWh increase for the third quarter (July to September), but the rates were frozen. At that time, Kim Ki-hyun, leader of the People Power Party, suggested that electricity and gas rates might hold steady in the latter half of the year, implying no rate hikes.

However, KEPCO now believes it cannot delay electricity rate increases any longer and plans to submit the fourth quarter fuel cost adjustment unit price calculation details, which include the need for a rate hike, to the Ministry of Trade, Industry and Energy on the 18th. Earlier, the ministry’s 'KEPCO Business Normalization Plan' indicated that a 51.6 KRW per kWh increase in electricity rates is necessary by 2026 to eliminate KEPCO’s deficit. The rate hikes for the first and second quarters this year total 21.1 KRW, meaning an additional increase of over 30 KRW is needed this year to resolve the deficit.

On the 7th, Prime Minister Han Duck-soo appeared at a National Assembly government questioning session and stated, "If possible, electricity rate adjustments should be carefully considered," indicating the necessity of a rate hike. However, on the 13th, during his confirmation hearing, nominee for Minister of Trade, Industry and Energy, Moon Beom-gyu, said, "Before we can tell the public that rate adjustments are necessary, painful structural reforms must precede it," emphasizing that restructuring must come before rate adjustments.

The calculation details submitted by KEPCO are expected to be disclosed when the fourth quarter electricity rates are decided, possibly as early as the 21st. However, with the Chuseok holiday approaching and the time needed for Kim, the KEPCO president nominee, to receive formal appointment from the president, the decision may be postponed until after Chuseok.

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