State power monopoly Korea Electric Power Corporation (KEPCO) is projected to have incurred over 5 trillion won ($3.8 billion) in losses from operation in the second quarter after record quarterly red of 7.8 trillion won in the previous quarter due to unfazed strengthening in fuel imports.

According to financial data tracker FnGuide Tuesday, brokerages projected KEPCO to have logged a consolidated operating loss of 5.37 trillion won for the April-June period, almost matching last year’s annual loss of 5.86 trillion won. The first-half deficit would have topped 13 trillion won.

KEPCO will post its second quarter results on Friday.

Shares of KEPCO were trading 0.23 percent higher at 21,750 won on Tuesday morning.

Heavy losses had been unavoidable as electricity rates stayed capped despite surged energy costs from expensive imports.

The system marginal price (SMP), which refers to the price that KEPCO pays to electricity producers, reached 202.11 won per kilowatt hour (kwh) in April, surpassing 200 won for the first time and up 164.7 percent from the same period a year ago. SMP fell to 140.34 won in May and 129.72 won in Jun, eased from 154.42 won in January, 197.32 won in February, and 192.75 in March.

KEPCO’s power unit price, however, fell to 105 won per kwh in May, from 114 won in January and 103 won in April when SMP came to 202.11 won.

KEPCO is expected to suffer even greater losses in the third quarter due to soaring purchase prices.

SMP in July stood at 151.85 won per kwh, up 17.1 percent from June. It reached 200.20 won on August 1, up from 139.88 won in the end of last month, and 206.39 won on August 4. Gas prices have soared as Russia has reduced supply.

KEPCO’s fuel cost adjustment fee applied for power costs in the third quarter in contrast rose only 5 won per kwh. Electricity bills consist of basic fuel cost, climate environment fee, and fuel cost adjustment fee.

“The gap between power purchasing price and sales price has widened this summer,” said an unnamed official from KEPCO. “Losses will inevitably grow in the third quarter if current trend continues.”

The Ministry of Trade, Industry and Energy in May has given administrative notice on placing a temporary cap on the rise in SMP in the advent of unusual surge, but the move has been stalled due to protest from private suppliers.

Private electricity producers contest they were being sacrificed to make up for KEPCO losses.

The option of further hiking electricity rates also cannot be reviewed, with inflation already flying above 6 percent.

“Electricity rate increase should be kept to a minimum given difficult livelihoods of the people,” said Industry Minister Lee Chang-yang told reporters Monday. “We will review other options after consultation with the finance ministry.”

By Pulse

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