Choi Yeon-hye, Gas Gong President: "Situation Hard to Endure... Prompt Rate Increase Absolutely Necessary"

Press Corps Luncheon Meeting
Q1 Outstanding Receivables 13.5 Trillion Won... Expected to Exceed 14 Trillion by Year-End
'Outstanding Receivables → Increased Financial Costs → Rate Hikes' Vicious Cycle Inevitable

Choi Yeon-hye, President of Korea Gas Corporation, emphasized on the 22nd, "The outstanding payments for residential city gas are expected to reach 13.5 trillion won in the first quarter of this year and at least 14 trillion won by the end of the year. It is becoming increasingly difficult to sustain the current situation, so a prompt rate increase is absolutely necessary."

At a press briefing held that day, President Choi said, "The current scale of outstanding payments is such that even if all employees worked without pay for 30 years, it would be impossible to recover, making us feel as if we are standing at the edge of a cliff."

Kiyunhye Choi, President of Korea Gas Corporation, is explaining the necessity of gas price increases at a press conference held on the 22nd.

KOGAS relies entirely on external borrowing for investment in natural gas supply facilities and recovers these costs through fees over a long period. The investment costs procured through external borrowing are typically recovered over 20 to 30 years through fees.

However, recently, the cost recovery rate of gas fees has been around 80%, causing outstanding payments to continue accumulating. According to KOGAS, since 2022, international liquefied natural gas (LNG) prices have risen by about 200%, but domestic gas fees have only increased by about 43%. The difference corresponds to the increase in outstanding payments.

President Choi stated, "Due to the low cost recovery rate, KOGAS is currently managing its operations through borrowing, and the interest cost on these borrowings amounts to 4.7 billion won per day. The increase in interest costs becomes a factor for further fee increases, which ultimately leads to a burden on the public."

He continued, "With the Russia-Ukraine war and the worsening Middle East conflicts causing instability in international oil prices and exchange rates, crises have become commonplace. KOGAS imports a single product (LNG), making it difficult to respond to external variables. There are concerns about cash flow tightening during emergency situations in winter, which could lead to a decline in international credit ratings, an increase in financing costs, and difficulties in procuring natural gas volumes."

KOGAS raised residential gas fees by 1.04 won per megajoule (MJ), about 5%, in May last year. Increasing the fee by 1 won can recover approximately 500 billion won in outstanding payments. To resolve the 13.5 trillion won outstanding payments within a year, it is calculated that fees must be increased by 27 won per MJ. As of the 1st of this month, the wholesale residential city gas fee is 19.4 won per MJ, meaning fees would need to be more than doubled.

However, President Choi refrained from specifying the exact scale and timing of the rate increase. He said, "Given the domestic demand pattern where usage is higher in winter, the public's perception of a city gas fee increase will inevitably be much stronger in winter. Therefore, it is necessary to raise fees during the summer when demand is lower and to implement a gradual, smooth adjustment."

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