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 third quarter. This rate has been unchanged for 17 consecutive quarters since the third quarter of 2022.
The electricity authorities determine the timing and extent of any rate increases by considering various factors, including the fuel cost adjustment rate, KEPCO's accumulated losses, and inflation. Electricity rates consist of a basic charge, energy charge (standard fuel cost), climate and environmental charges, and fuel cost adjustment charges.
The fuel cost adjustment rate, set by the 21st of the month preceding each quarter, reflects fluctuations in fuel prices, such as those for bituminous coal and liquefied natural gas (LNG), over the three months prior. This mechanism allows for a flexible response to short-term energy price changes.
The fuel cost adjustment rate is applied within a range of ±5 won per kWh based on the fluctuations in fuel prices over the past three months, with the current maximum of +5 won already in effect. Considering the standard fuel cost of 688.64 won per kilogram, the necessary adjustment rate would be -3.4 won. However, due to KEPCO's ongoing accumulated 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 rate while also keeping other charges, such as the basic charge, energy charge, and climate and environmental charges, unchanged, resulting in a freeze on electricity rates for the third quarter.
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 amount of the fuel cost adjustment charge," and urged the company to thoroughly implement self-rescue efforts for its management normalization.
* This article has been translated by AI.
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