Electricity rates ‘freeze’ in the first quarter of next year… Refusal to raise inflation fears

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Korea Electric Power Corporation (KEPCO) frozen electricity rates for the first quarter of next year today (20th).

KEPCO announced on its website today that it has set the final fuel cost adjustment unit price for January to March next year at 0 won per kWh, the same as in the fourth quarter.

It was decided to maintain the adjusted fuel cost at the level in the fourth quarter of this year.

At the end of last year, when the government reformed the electricity rate system, the fuel cost index system was introduced. Accordingly, KEPCO has been reflecting electricity generation fuel costs such as oil, coal, and liquefied natural gas (LNG) in its rates every quarter starting this year.

This is to reduce performance volatility due to changes in fuel cost, and the change in fuel cost is determined by the ‘fuel cost adjusted unit price’ calculated as the difference between the performance fuel cost (average fuel cost for the preceding three months) and the reference fuel cost (average fuel cost for the preceding year).

According to KEPCO’s announcement, the adjusted unit price for the first quarter of next year is 29.1 won/kWh.

This is the result of a 178.05 won/kg increase in the performance fuel cost compared to the standard fuel cost (289.07 won/kg from December 2019 to November 2020) due to a surge in prices of bituminous coal, LNG, and BC oil.

Accordingly, KEPCO submitted a proposal for a 3 won increase to the government by applying a quarterly adjustment, but it was frozen as the government decided to ‘reserve’.

Electricity rates are announced by KEPCO, but are determined after consultations with the Ministry of Strategy and Finance and the Ministry of Trade, Industry and Energy.

A KEPCO official said, “The reason for the reservation notified by the government is to promote the stability of people’s lives due to the prolonged Corona 19 and high inflation rate.”

This means that the government has decided to freeze it in comprehensive consideration of the recent price trend, despite the sharp rise in international fuel prices.

Any unadjusted amount due to the retention of the interlocking system will be reflected and settled as the overall cost when the rate is adjusted later.

In addition to the fuel cost indexing system, the electricity rate also reflects climate and environment rates.

KEPCO said, “We are calculating the standard fuel cost and climate environment fee to be applied next year, and we plan to discuss with the government how to reflect the burden on the public in comprehensive consideration.”

Reference-news.sbs.co.kr

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