Lee Jae-myung, the Democratic Party of Korea presidential candidate, and Kim Moon-soo, the People Power Party presidential candidate, each promised to lower electricity rates with pledges such as "differentiated regional rates" and "half-priced electricity bills." Energy industry insiders express concern that the financial burden on the Korea Electric Power Corporation will increase due to the "energy populism" that occurs every election.
The liabilities of KEPCO exceed 200 trillion won, incurring about 4 trillion won in interest annually. If KEPCO's financial structure does not improve, it will not be able to make necessary investments, such as establishing a power grid for the artificial intelligence era.
Lee noted during an on-site campaign in Gunsan, North Jeolla Province, on the 16th, that "when electricity rates are raised, regional areas should either increase them less or maintain them to create a difference in energy costs," hinting at the introduction of a differentiated regional rate system.
According to an analysis released by The Federation of Korean Industries last September, if a differentiated regional rate system is implemented, electricity rates in the metropolitan area may be up to 17 won per kilowatt-hour higher, though Lee did not comment on this. The average monthly electricity usage for a four-person household in summer is 427 kilowatt-hours. If electricity rates for households in the metropolitan area are not raised, KEPCO's burden will increase accordingly.
Kim stated that he would reduce electricity rates by raising the proportion of nuclear energy in electricity production to 60%. The plan is to lower production costs by increasing nuclear energy generation, thereby reducing industrial electricity rates. This move is interpreted as a way to mitigate concerns of corporations potentially transferring their factories abroad due to increased industrial electricity rates.
KEPCO recorded an operating profit of 3.7536 trillion won in the first quarter of this year. This marks the seventh consecutive quarter of profit, a 188.9% increase (2.4543 trillion won) compared to the same period last year, the highest since the third quarter of 2016 (4.4242 trillion won). The two electricity rate increases last year also had a positive impact. On April 1 last year, KEPCO raised the fuel cost adjustment price by 5.0 won per kilowatt-hour, and on October 1 of the same year, it increased industrial electricity rates by an average of 9.7%. In the first quarter of this year, KEPCO's electricity sales revenue was 23.21121 trillion won, an increase of 1.0462 trillion won compared to the same period last year. Sales also rose to 24.224 trillion won, a 4% increase from the same time last year.
The problem is the liabilities. As of the end of last year, KEPCO's accumulated liabilities were 205.445 trillion won, an increase of 3 trillion won compared to the previous year. The liability-to-asset ratio stands at 496.7%. During the COVID-19 pandemic, electricity was supplied at prices lower than production costs, leading to deficits and increased liabilities. The cumulative operating deficit reached 30.9 trillion won from the beginning of the energy price fluctuations in 2021 up to the first quarter of this year.
Professor Kim Jin-soo of Hanyang University's Department of Resource and Environmental Engineering said, "It is difficult to implement a fuel cost linkage system when energy prices soar. (When energy prices are low as they are now) we need to introduce the fuel cost linkage system to realize electricity rates without shocking household finances."
Professor Kim Seung-wan of the Korea Institute of Energy Technology University said, "If industrial electricity rates are raised further, there may be a transfer abroad. There may be a lot of negative public opinion, but we need to normalize electricity rates targeted at the private sector."