The clash between the market logic and the will for price stability… Electricity rate decision likely to be delayed

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KEPCO’s operating loss of 7.8 trillion won in the first quarter alone… “The more you delay the raise, the greater the burden.”
‘Prices are the top priority’… Allowing an increase will undermine the will to stabilize prices
If the hike is accepted, KEPCO will demand high-intensity pain sharing

The Ministry of Strategy and Finance, the price authority, is contemplating whether to accept KEPCO’s demand for an increase in electricity rates.

According to the market logic that the Yoon Seok-yeol administration places importance on, it is correct to raise electricity rates in the face of global energy inflation.

According to the government authorities on the 19th, the Ministry of Strategy and Finance, the price authority, is discussing whether to accept an electricity rate increase in the third quarter.

A government official said, “As KEPCO’s deficit is snowballing due to skyrocketing international energy prices, we are aware of the need to raise prices.” I have a problem,” he said.

On the 16th, KEPCO requested the government to raise electricity rates by submitting the calculation of fuel cost adjustments for the third quarter.

As for fuel cost adjustment, the maximum increase is ±3 won per kWh (kilowatt hour) compared to the previous quarter, but KEPCO wants to raise the maximum by 3 won.

The clash between the market logic and the will for price stability...  Electricity rate decision likely to be delayed

Not only the Ministry of Trade, Industry and Energy, which is the responsible ministry, but also the ruling party are of the opinion that it is necessary to raise electricity rates.

Il-Jun Park, 2nd Vice Minister of Industry and Trade, said at a recent press conference, “The increase in electricity rates is inevitable.

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People’s Power Floor Leader Kwon Seong-dong also said at a press briefing after the ‘New Government Economic Policy Direction Party/Government Council’, “In order to stabilize prices, it is possible to restrain that part (public rate increase), but in that case, the market function will be distorted, so the government judges appropriately. So (but), I think that the electricity rate hike is not inevitable now.”

KEPCO posted an operating loss of 7.786 trillion won in the first quarter of this year alone.

It is even predicted that the annual loss this year will reach 30 trillion won if electricity rates remain the same.

In a situation where the international energy price, which is the cost of producing electricity, is soaring, if the final price is left as it is, the deficit will inevitably increase.

And in the end someone has to pay for it.

The raise period is the background of the logic of now.

The clash between the market logic and the will for price stability...  Electricity rate decision likely to be delayed

The Ministry of Strategy and Finance, which has the authority to discuss public rate increases under the Price Stabilization Act, is strongly opposed.

In a situation where the government is urgent enough to raise the consumer price inflation forecast for this year from 2.2% to 4.7%, if the government tolerates an increase in electricity rates, which is the original price of various goods and services, it will inevitably lead to a steeper rise in prices.

Raising electricity rates raises suspicions about the government’s goal to put price stability as the top priority for the people’s livelihood economy.

In a market economy, the only reason the government can’t control public rates is that it can’t even manage public rates, so the justification for demanding that the private sector refrain from raising prices will be weakened.

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There is also considerable awareness of the problem that KEPCO’s self-rescue efforts are insufficient.

During a personnel hearing last month, Deputy Prime Minister and Minister of Strategy and Finance Choo Kyung-ho said, “KEPCO’s deficit this year could reach 20 to 30 trillion won.

When asked if there are any countermeasures, he said, “What did KEPCO do when it was in a surplus of 10 trillion won or more?”

It raises the issue of not preparing for when business conditions deteriorate when making a lot of profit, and that when there is a loss, an easy response is made with a rate increase.

The clash between the market logic and the will for price stability...  Electricity rate decision likely to be delayed

As the concerns of the price authorities deepen, the possibility that the decision to raise electricity rates in the third quarter will exceed the 21st announced by KEPCO is leaking from within the price authorities.

The Ministry of Strategy and Industry and the Ministry of Industry have a lot to look at and discuss together.

If the electricity rate hike is tolerated in consideration of the accumulated deficit, KEPCO also has a strong sentiment that it should share the suffering that will increase the burden on the public.

/yunhap news

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