All-Out Deployment of 'Rate Freezes and Regulations' for Electricity, Gas, and Oil... Government Fights to Stabilize Prices (Comprehensive)

Amid ongoing debate over the "electricity bill bomb" due to the prolonged heatwave this year, the government began reviewing electricity rate hikes on the 23rd. An electricity meter is installed in a commercial building in Seoul. Photo by Jinhyung Kang

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Amid growing upward pressure on international energy prices due to instability in the Middle East, the government has responded by taking measures to jointly manage public energy rates, including electricity, gas, and petroleum. Even as the likelihood of rising fuel costs increases, the government is focusing on price management by maintaining a freeze and imposing regulations on rates, rather than opting for rate hikes.

Korea Electric Power Corporation (KEPCO) announced on the 23rd that it will maintain the fuel cost adjustment rate for the second quarter of this year (April to June) at +5.0 won per kWh. This is the same level as in the first quarter.

The calculation for the second quarter fuel cost was based on the average trade statistics price over the three months from December 2025 to February 2026. The actual fuel cost is derived by applying conversion factors to the prices of bituminous coal, liquefied natural gas (LNG), and bunker C oil, and the adjustment rate is then determined by comparing the actual fuel cost to the reference fuel cost.

The actual fuel cost, reflecting the prices of bituminous coal, LNG, and bunker C oil, came to 410.85 won per kg, which is lower than the reference fuel cost of 494.63 won per kg (after deductions). Accordingly, the calculated fuel cost adjustment rate was -11.2 won per kWh.

However, the fuel cost adjustment rate is designed to be adjusted within a range of ±5 won per kWh. While it would be possible to lower the rate to -5.0 won per kWh by applying the upper and lower limits, the government has decided to maintain the current rate.

The government explained that this decision was based on a comprehensive consideration of KEPCO's financial situation and the significant amount of unrevised fuel cost adjustment charges. At the same time, the government ordered KEPCO to maintain the existing rate while also taking self-rescue measures to normalize its management.

LNG carrier docked at Korea Gas Corporation's Incheon production base. Photo by Yonhap News.

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This approach to price management by the government is also expected to affect gas rates. The city gas rate structure is linked to LNG import prices, so upward pressure is inevitable due to Middle East instability. However, given the government's ongoing policy of managing all public utility rates, it is expected that an immediate rate increase will not be easy.

The government is taking even more direct control over petroleum prices. The maximum price system for petroleum products, which took effect on the 13th, sets a ceiling on the wholesale prices that refiners supply to gas stations. This measure is intended to slow the pace at which rising international oil prices are passed on to consumers.

Recently, the government also began working on overhauling the seasonal and time-of-use electricity rate system, aiming to fundamentally change the structure of electricity consumption. The reform plan is designed to lower rates during daytime hours when solar power generation is high and raise rates during the evening and nighttime hours when demand is concentrated.

Specifically, the proposal reduces the rate burden from 9:00 a.m. to 3:00 p.m., while relatively increasing rates during peak hours, such as between 6:00 p.m. and 9:00 p.m. This measure is intended to encourage consumption during periods of ample electricity supply and to reduce usage during times of insufficient supply.

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This simultaneous management of electricity, gas, and petroleum rates across the energy sector is seen as a response aimed at preventing inflationary instability stemming from increased Middle East risk. Recently, as military conflict between the United States and Iran has intensified, concerns over the stability of crude oil and LNG supplies have grown, while heightened tensions in the Strait of Hormuz have further increased energy price volatility.

However, the current rate system is not able to immediately reflect these market conditions. Electricity rates are calculated based on the average fuel price over the previous three months, so recent price increases have not been fully reflected in this second quarter's rates. In effect, rates have been set based on "pre-Middle East risk prices."

As a result, it is widely expected that upward pressure on rates will become unavoidable going forward. In particular, after the third quarter, when electricity demand peaks during the summer, the rise in fuel costs is expected to be fully reflected, increasing the likelihood of rate adjustments.

Moon Sinhak, Vice Minister of Trade, Industry and Energy, also stated regarding the second adjustment of the maximum petroleum price scheduled for the 27th, "As the increase in international oil prices is reflected, it is inevitable that the maximum price for petroleum products will rise."

If not only electricity rates but also gas rates are raised together, the overall impact on prices is expected to be significant. Since energy prices are a variable that affects costs across both the manufacturing and service sectors, the adjustment of public utility rates could well drive overall inflation.

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