KEPCO frozen electricity rates in the second quarter (April-June). Despite the fact that the rate hike was large, the government, concerned about inflation, put a brake on it. The economy was hit by the aftermath of the new coronavirus infection (Corona 19), and public sentiment was worried about worsening public sentiment ahead of the Seoul-Busan mayoral by-election in April.
International oil rises and there are adjustment factors
KEPCO freezes after government notifies of reservation
It’s hard to keep tied, I think I’ll raise it for the third quarter
KEPCO announced on the 22nd that it had withheld an increase in electricity rates for the second quarter. Accordingly, in the second quarter, a maximum of 1050 won per month for a four-person household will be reduced. The fuel cost adjustment unit price for the second quarter was set at -3 won per 1 ㎾h (kilowatt-hour) following the first quarter. According to KEPCO’s calculation, the 2Q fuel cost adjustment unit price is -0.2 won per ㎾h. It means that KEPCO is carrying a fee of 2.8 won per ㎾h.
Unlike in the past, KEPCO separately announced the reason for freezing the electricity bill. KEPCO said, “There was a factor to adjust the fuel cost adjustment unit due to the rise of international oil prices. In order to promote the stability of people’s lives, which are suffering from prolonged periods, the government received a notice of reservation. The intention is to follow the government policy rather than the company’s will.
In fact, according to the fuel cost indexing system applied from this year, an increase in electricity rates was inevitable. The fuel cost index is a system that raises or lowers the fuel cost adjustment fee every three months according to fluctuations in import prices of oil, LNG, and coal. This is why the market predicted an increase in electricity rates, taking into account the trend of international oil prices, which surged this year. If the rate was raised, it was only 7 years since November 2013.
However, the government put a brake on the rate hike by applying the KEPCO fuel cost adjustment rate operation guidelines, stating that the Minister of Trade, Industry and Energy can withhold the imposition of the adjusted fee in case of an emergency. The reason is that there is a concern that there is a risk of increasing the burden on the common people if even the public charge rises in a situation where the price of the table is rapidly jumping. It was also burdensome to pursue policies to encourage inflation ahead of the Seoul-Busan mayoral by-election in April.
An official from the Ministry of Industry said, “It is unfavorable in terms of policy coherence because the situation is to support electricity bills for small business owners and vulnerable groups by organizing an additional budget plan.”
However, it is pointed out that the newly introduced fuel cost index was disabled. If the system is operated politically, the reliability of the electricity rate adjustment can be lost. Park Kwang-soo, a senior research fellow at the Energy Economics Research Institute, said, “If we reflect the recent increase in fuel prices, the rate increase is natural.” “For the convenience of the government, electricity rates should not be used as a policy tool.”
Once frozen, it is expected that it will be difficult to keep the electricity bills tied. This is because the power gap is being filled with LNG and renewable energy instead of cheap nuclear and coal power generation according to the post-nuclear power plant policy. In addition, as international oil prices have risen in line with the recent global economic recovery, there is a possibility to raise electricity rates for the third quarter to be announced in July.
Sejong = Reporter Kihwan Kim [email protected]
