October will see a simultaneous increase in electricity and gas bills, which is the third time following April and July this year. The increase is inevitable as Korea Electric Power Corporation (KEPCO) and Korea Gas Cooperation (KOGAS) are suffering losses by a wide margin due to their billing systems where they import fuels including gas at high prices and sell them at low prices for consumers.
The government is cautious about how much it will increase as it cannot sit on its hands about the losses of KEPCO and KOGAS, but at the same time, it needs to think about the price burden placed on ordinary Koreans.
On Monday, the Ministry of Economy and Finance, the Ministry of Commerce, Trade and Energy, and KOGAS agreed to increase power prices in October and discussed how much they will increase. Gas rates are determined by adding LNG import unit price--the cost of power generation materials (the reference fuel price+settlement unit price)--, and the cost of wholesale and retail supply.
The two ministries and KOGAS decided at the end of last year to increase the settlement unit price from 0 to 1.23 won/MJ in May, 1.9/MJ in July, and 2.3/MJ in October. However, with the predetermined settlement unit price hike, KOGAS is arguing that the reference fuel price also needs to be raised as unpaid bills are mounting due to surging international energy prices. The reference fuel price was increased by 0.44won/MJ with the scheduled settlement unit price hike this July.