KEPCO may have to bump up power rates Q2 as Jan-Feb deficit likely topped $2 bn

2022.03.16 10:53:55 | 2022.03.16 15:33:11

[Photo by Lee Chung-woo]이미지 확대

[Photo by Lee Chung-woo]

South Korea’s state-owned utility company Korea Electric Power Corporation (KEPCO) may up electricity charge in the second quarter as it had lost as much as 1.6 trillion won ($1.2 billion) in January alone in power supply.

According to KEPCO’s monthly electricity report on Tuesday, KEPCO spent 7.3 trillion won to purchase electricity but earned 5.7 trillion won from its power sales in January, resulting in a deficit of 1.6 trillion won.

Compared to a year ago period, it had spent 2.6 trillion won more in purchasing power from the public and private generators.

The deficit streak is expected to run deeper due to soaring oil and gas prices.

KEPCO’s power unit price was 137 won per kwh in January but in February, it surged 16 percent to 160 won per kwh as fuel costs spiked. This means KEPCO would have paid about 8.5 trillion won to purchase power in February, which could be translated into a wider negative spread of 2 trillion won in February.

The wholesale power price, or system marginal price (SMP) KEPCO pays to power producers to buy electricity, is about to exceed 200 won per kwh. The SMP, which was around 70 won in January last year, more than doubled to 154 won in January after the global oil prices started spiking.

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In February, SMP reached 197 won and it is expected to continue its upward trend as oil prices continue to rise. Many are forecasting that the average annual oil price will exceed $100 this year.

To mitigate the losses, KEPCO has no choice but to hike electricity bill in the second quarter.

According to the flexible electricity billing system adopted last year, KEPCO will inform the Ministry of Trade, Industry, and Energy its adjusted unit price for the second quarter for the ministry’s review. Upon approval on March 20, the utility company discloses the fee system for the second quarter on March 21.

KEPCO’s operating loss has been projected at 20 trillion won for this year. The government earlier announced that they would raise electricity bills in April and in October.

But two hikes may be difficult if strong inflation continues.

Korea’s President-elect Yoon Suk-yeol had promised to contain the rise in power bill to ease burden on consumers.

Shares of KEPCO closed at 24,650 won, up 0.61 percent on Wednesday.

By Song Gwang-sup and Susan Lee

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