Korea Electric Power Corp. (KEPCO) is demanding that its hike in electricity prices be approved for three years from July amid rising fuel costs and snowballing losses.
The utilities company delivered its rate hike proposal to the Ministry of Trade, Industry and Energy and the Ministry of Economy and Finance, which will make the decision.
Electricity rates consist of a basic fuel cost, a climate environment fee and a fuel cost adjustment fee. KEPCO is proposing a fuel cost adjustment fee hike of 3 won ($0.002) per kilowatt-hour (kWh), while demanding that the cap on the on-quarter increase be raised from the current 3 won to 5 won.
The government has already raised the basic fuel cost by 4.9 won per kWh and the climate environment fee by 2 won to 7.3 won in April. It is also set to raise the basic fuel cost by another 4.9 won in October.
KEPCO says the fuel cost adjustment fee hike is necessary as the electricity purchase cost has increased with rising fuel costs such as coal, petroleum and liquefied petroleum gas (LPG). Second Vice Minister of Trade, Industry and Energy Park Il-jun and the ruling People Power Party’s floor leader Kwon Seong-dong said on Wednesday that the electricity rate hike was “inevitable.”
“The more we put off the KEPCO loss issue, the greater the burden will be on the future generation,” Park said.
“The government can constrain (the electricity and public bill rates) to stabilize prices, but that could distort market functions,” Kwon said. If approved, electricity rates will be raised next month, adding to the burden caused by the already steep inflation rise.
KEPCO has reported an operating loss of nearly 7.79 trillion won in the first quarter of this year, which is about 2 trillion won more than its entire deficit last year.
The electricity provider said last month that it will sell equity, property and all overseas coal power plants, including one in the Philippines, and take cost-cutting measures to make up for more than 6 trillion won.
As of June, KEPCO said it has secured 130 billion won by selling equity and property, and has deferred or saved 1.3 trillion won in its budget through drastic cost-cutting.
In addition to selling its stakes in KEPCO Engineering and Construction and Sinan solar power plant, KEPCO plans to secure 1.9 trillion won by selling its overseas coal power plants and mines.
The company said it will sell property to secure 700 billion won. It will also adjust the timing of investments in renewable energy plant construction projects and cut spending to secure another 2.6 trillion won.
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