I need to increase it according to the’fuel cost linkage’… The electricity bill that the government paid before election

With the introduction of the’fuel cost indexing system’, the adjustment of electricity rates, which had been announced for the first time in 7 years, was delayed. Initially, considering the steep rise in international oil prices, an increase in electricity rates was predicted, but it was frozen due to the government’s initiation of the reservation authority. The fuel cost index is a system that reflects the increase in the cost of fuel required for electricity production, such as natural gas (LNG), in the electricity rate every three months. It was introduced in December of last year to correct distorted electricity bill calculation. This measure takes into account the cumulative deficit of KEPCO, a public power sales company, as the electricity price could not be raised even if fuel costs have risen before. However, it is pointed out that even though fuel costs have risen over the past three months, the government’s breath of the increase in electricity rates has made the purpose of introducing the fuel cost indexing system unclear.

Electricity rate adjustment unit price should increase, but… the government activates the reservation right

According to KEPCO on the 22nd, the adjusted unit price for electricity rates in the second quarter, which will be applied for three months from April 1st, is set at -3.0 won per kilowatt (kW), which is the same as in the first quarter. This is the second electricity rate adjustment after the introduction of the linked cost linkage system. As fuel costs have risen over the past three months, electricity rates are expected to increase this time. Looking at fuel costs for the past three months (December 2020 to February 2021), which is the basis for calculating the electricity rate for the second quarter, bituminous coal, LNG, and BC oil averaged 113.61 won, 508.97 won, and 442.64 won per kilogram, respectively. Compared to the average at the time of September-November 2020, which was calculated for the first quarter (108.65 won for coal briquettes, 350.24 won for LNG, 373.33 won for BC oil), they all increased significantly. Taking this into account, the cost of the adjustment of electricity rates should have been set at -0.2 won per ㎾h, up 2.8 won per ㎾h from the first quarter.

However, the government issued a reservation right on the same day to suppress an increase in the cost of adjusting electricity rates. The reservation right is the power to allow the government to decide whether or not to accept the change in fuel costs when requested by KEPCO to reflect changes in fuel costs. The Ministry of Trade, Industry and Energy said on the background of the reservation, “the fuel cost adjustment unit price factor occurred due to the influence of the rise in international oil prices,” and “the temporary surge in LNG prices caused by a strange wave last winter was reserved to reflect the new coronavirus infection (coronavirus). 19) It is necessary to seek stability in the lives of the people who are suffering from difficulties due to prolonged periods.”

The purpose of the fuel cost linkage system is damaged when the reservation right is repeatedly used.

Nevertheless, there are many negative voices regarding the government’s decision. An official from a civic group said, “The government did not reflect the cost of the adjustment of electricity bills, and KEPCO took the cost intact.” ”He pointed out.

Some are suspicious that the government is watching the public opinion ahead of the by-election of Seoul and Busan mayors this April and the next presidential election. It is inevitable to raise electricity rates in the future due to the rise in international fuel prices, based on the observation that it appears to be a temporary measure taken by the government to avoid the immediate election season. Seung-hoon Yoo, a professor at the Department of Energy Policy at Seoul National University of Science and Technology, said, “When the election season comes, both parties will turn to a negative position on the adjustment of utility bills.” .

There is also a view that the government’s right to reserve electricity rates will be used in June, three months later. A high-ranking official from the Ministry of Industry said on the day, “For the stable settlement of the fuel cost index, it is necessary to consider short-term shocks.” “As this time the reflection of the temporary surge in LNG prices caused by the strange wave was reserved, such variables will be taken into account in the next decision. I said. If the government’s use of the reservation right is repeated, the fuel price index will inevitably become ineffective. Chung Dong-wook, professor of energy system engineering at Chung-Ang University, said, “The fuel cost linkage system shares KEPCO’s business risks with consumers. It is difficult to say that KEPCO, which made a surplus of over 4 trillion won last year, will raise electricity bills now.”

Hyunwoo Kim reporter [email protected]

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