Korea Electric Power Corporation (KEPCO) announced on June 22 that it will maintain the fuel cost adjustment rate at 5 won per kilowatt-hour (kWh) for the upcoming quarter. This rate has been unchanged since the third quarter of 2022, marking 17 consecutive quarters at the current level.
The electricity authorities consider various factors, including the fuel cost adjustment rate, KEPCO's accumulated losses, and inflation, when determining the timing and extent of any potential electricity rate increases. Electricity rates consist of a basic charge, energy charge (based on standard fuel costs), climate and environmental charges, and fuel cost adjustment charges.
The fuel cost adjustment rate, which is set by the 21st of the month preceding each quarter, reflects fluctuations in fuel costs such as coal and liquefied natural gas (LNG) over the previous three months. This mechanism allows for a flexible response to short-term energy price changes.
The adjustment rate is applied within a range of ±5 won per kWh based on recent fuel cost fluctuations, with the maximum of +5 won currently in effect. Considering the standard fuel cost of 688.64 won per kilogram, the necessary adjustment would be -3.4 won. However, due to KEPCO's ongoing financial losses, the government has decided to keep the fuel cost adjustment rate at its current level.
Amid significant increases in international oil prices, the government has frozen the fuel cost adjustment charge at its current level, and no adjustments will be made to other rate components such as the basic charge, energy charge, and climate/environmental charge. Therefore, electricity rates for the third quarter will remain unchanged.
The government informed KEPCO that "the fuel cost adjustment rate for the third quarter will continue to be applied at +5 won per kWh, considering KEPCO's financial situation and the substantial unadjusted fuel cost adjustment charges. We hope that KEPCO will diligently implement measures for its financial normalization."
* This article has been translated by AI.
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