The high demand for electricity and its record levels pushed South Korea to raise electricity prices, amid expectations of a deficit in the country, with the start of recovery from the effects of Corona.
The government-run Korea Electric Power Corporation (KEPCO), announced today, Thursday, that it plans to raise electricity prices in the last quarter of this year; To reflect the increase in global resource prices, the Korean Yonhap News Agency reported.
KEPCO said it plans to end the discount of 3 won ($0.0025) per kilowatt-hour, which has been in place since the first quarter; This will lead to a significant increase in costs for households in October.
Under the new rates; An average household of 4 is expected to pay an extra 1,050 won ($0.90) each month.
The new increase in electricity prices represents the first increase in the electricity rate since November 2013.
The Ministry of Trade, Industry and Energy had recently expected that the country’s electric power reserves would drop to the lowest level at 4 gigawatts, due to rising temperatures and the economy’s recovery from the repercussions of the Corona pandemic.
South Korea takes emergency measures, including controls on the use of air conditioners in homes, offices and factories, if electricity reserves fall below 5.5 gigawatts.
The maximum electricity consumption in the country has approached the 92 gigawatt barrier during the past days.
South Korea’s maximum electricity use hit an all-time high of 92.5 GW on July 24, 2018, when the country was hit by its hottest heat wave in 111 years.
Link prices to fuel
KIPCO has adopted flexible electricity prices linked to international fuel prices starting this year, in a move to improve its profitability, after it had previously imposed the price of electricity under a fixed-rate billing system.
Under the current system, the electricity billing system is reviewed every 3 months, depending on global price movements for liquefied natural gas, coal and crude oil.
Due to concerns about the excessive financial burden on local families amid the COVID-19 pandemic, the company refrained from raising the rate despite fluctuations in global fuel prices.
KIPCO turned a net loss in the second quarter of 2021 after operating costs rose. Net loss reached 673.9 billion won ($580 million) in the April-June period, compared to a profit of 202.9 billion won ($170 million). Registered in the previous year.
The latest adjustment in the electricity rate may accelerate inflation in Asia’s fourth largest economy.
South Korea’s consumer prices actually jumped more than 2% for the fifth consecutive month in August due to higher agricultural and oil prices; This indicates the continued accumulation of inflationary pressures amid the economic recovery.