South Korea’s state utility Korea Electric Power (KEPCO) announced on Wednesday that electricity rates would be frozen during the July-September quarter. This decision follows two previous rate hikes within the first half of the year.
Analysts suggest that the government initially postponed raising electricity rates in order to manage inflation and maintain public satisfaction.
In an effort to address KEPCO’s mounting debt, which reached 197.9 trillion won ($153.40 billion) by the end of March, South Korea has increased electricity rates by approximately 40% since last year. This adjustment aimed to reconcile the disparity between global energy prices and local electricity rates.
Consumer inflation in May remained higher than the central bank’s 2% medium-term target, standing at 3.3%. In 2022, inflation experienced a significant surge, peaking at 6.3% in July, leaving consumers still grappling with its repercussions.
Recognizing the burden on consumers, second vice industry minister Kang Kyungsung stated last week that raising electricity rates would not be an easy task. The government is currently assessing recent energy prices, local inflation rates, and KEPCO’s financial situation to inform their decision.
For the first quarter, the government raised rates by 13.1 won per kilowatt hour (kWh), followed by an additional increase of 8 won for the second quarter.
However, the rate hikes implemented thus far fall short of the 51.6 won per kWh estimated by the industry ministry as necessary to curtail KEPCO’s losses and restore the company’s financial stability by 2026.
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