South Korea to freeze electricity rates in Q3 after hikes

SEOUL (Reuters) – South Korea will freeze electricity rates in the July-September quarter after raising prices twice in the first half of the year, according to state utility Korea Electric Power (KEPCO) on Wednesday.

The government had initially delayed raising electricity rates in order to keep inflation down and to keep voters happy, analysts said.

South Korea has hiked electricity rates by about 40% since last year from a low base, as a previous mismatch between global energy prices and local electricity rates caused KEPCO’s debt to snowball to 197.9 trillion won ($153.40 billion) as of the end of March.

Consumer inflation was still higher than the central bank’s medium-term target of 2%, at 3.3% in May. It had risen sharply in 2022, peaking at 6.3% in July – with consumers still feeling the effects.

“Considering the burden, I don’t think it will be easy to raise (electricity rates),” second vice industry minister Kang Kyungsung told reporters last week, adding the government is weighing up recent energy prices, local inflation and KEPCO’s finances.

The government hiked rates by 13.1 won per kilowatt hour (kWh) for the first quarter, and by 8 won for the second quarter.

The hikes so far fall short of the 51.6 won per kWh the industry ministry estimated would be needed this year to help stop KEPCO’s losses and restore its balance sheet health by 2026.

($1 = 1,290.1200 won)

(Reporting by Joyce Lee; Editing by Ed Davies)