Seoul: The state-run Korea Electric Power Corp. (KEPCO) announced on Monday that it will maintain the current electricity rates for the third quarter, despite recent declines in global energy prices. This decision is part of KEPCO's broader strategy to bolster its financial stability.
According to Yonhap News Agency, KEPCO will keep the adjusted unit fuel cost, a crucial component of the country's electricity pricing structure, steady at 5 won per kilowatt-hour (kWh) for the period from July to September. Typically, the fuel cost adjustment unit price is recalculated each quarter based on the energy prices of the preceding three months, including coal and liquefied natural gas (LNG).
Despite the recent reduction in fuel prices, which would have necessitated a decrease in the cost to -6.4 won per kWh, the government directed KEPCO to maintain the existing rate. The government emphasized the necessity of enhancing the company's financial soundness. KEPCO stated, "We were notified by the government to maintain the current rate of 5 won per kWh in the third quarter considering KEPCO's financial situation and the significant amount of unadjusted fuel cost charges in the past," underlining its ongoing efforts to stabilize its management.
KEPCO's financial challenges have been exacerbated by a record-high total debt of 205 trillion won (US$149 billion) last year, as revealed in its regulatory filing. This situation is partly attributable to high interest payments on existing debt. The company's financial woes began when it continued to offer electricity at prices below production costs, even as global energy prices soared between 2021 and 2023, largely due to the Russia-Ukraine conflict.
In an effort to alleviate financial strain, KEPCO increased the electricity rate for industrial use by 9.7 percent in October, while keeping rates for households and small stores unchanged.