Step may be construed as government’s attempt to improve ever-worsening finances of KEPCO
President Kim Jong-kap of Korea Electric Power Corp.
Starting Jan. 1, Korea Electric Power Corp. has effectively eliminated three discounts on electricity charges for traditional markets, EV charging and households preserving electricity.
The step may be construed as the government’s attempt to improve the ever-worsening finances of KEPCO.
The power company suffered more than 900 billion won in operating losses in the first half of 2019 in the wake of the government’s energy paradigm shift to wean the nation off nuclear power.
KEPCO held a board meeting on Dec. 30 and approved a plan to eliminate a discount on electricity charges for households preserving electricity, one of the three discounts, originally scheduled to expire with a sunset clause.
Instead, the plan calls for extending the expiry of two other discounts on electricity charges to June 2022 for EV charging and to next June for traditional markets.
Originally, KEPCO wanted to remove all the discounts on electricity charges starting Jan. 1 in accordance with the sunset clause.
Industry analysts said the power company reneged its original position and decided to postpone the expiry of the two discounts for traditional markets and EV charging until after the upcoming general elections slated for April, giving in the government pressure.
Households which consumed electricity more than 20 percent lower than in the past were given a discount of 10 to 15 percent on electricity charges. Households saved 28.8 billion won in 2018 and 45 billion won in 2019 in cumulative total.
The discount on electricity charges for EV charging will be extended for three years till June 2022.
Discounts will be retained to current levels until June, and after that, they will be reduced on two stages.
The special discount for EV charging made its debut in March 2016.
Cumulative discount amounts jumped from 18.8 billion won in 2018 to 33.3 billion won in 2019.
The expiry of the discount on electricity charges for traditional markets will be put off until June. In return of eliminating the discount, KEPCO instead decided to provide 28.5 billion won in financial support to traditional markets.
The step is designed to protect merchants of marginalized traditional markets. KEPCO plans to consult with the Ministry of SMEs and Startups and Korea Merchant Association on details, including support method. In principle, the government and KEPCO plan to phase out other discounts in upcoming months.
The elimination of special accounts on electricity charges is designed to stem the ever-worsening finances of KEPCO.
The power company logged 12.001.5 trillion won in 2016 on a consolidated basis. As the government launched its energy paradigm shift, KEPCO saw operation profit plunging to 4.953.2 trillion won in 2017 and falling to a deficit last year in six years.
In the first six months, the power company suffered 928.5 billion won in operating losses.
KEPCO’s debt rate is on the rise. The power company saw the debt rate soaring from 143.4 percent in late 2016 to 176.1 percent in 1st half 2019.
The worsening finances of the power company were mainly attributable to KEPCO’s more use of expensive liquefied natural gas in return for reducing cheaper nuclear power.
The government and KEPCO are expected to raise electricity charges in earnest after the national elections.
A view of KEPCO headquarters in Naju, Jeollanam-do. (Photos: KEPCO)