Wholesale power prices surge, heightening bill concerns

South Korea’s wholesale electricity prices have surged in April, rising more than 40 percent from the end of last year and fueling concerns over a sharp increase in power bills in the months ahead.

The climb comes even before the full impact of the Iran conflict is reflected, raising the likelihood of steeper increases from May.

According to the Korea Power Exchange, the system marginal price for mainland electricity stood at 132.58 won per kilowatt-hour on April 9, up 46.6 percent from 90.43 won in December. Prices have hovered around the 120-won level so far this month.

The SMP is the price at which generators sell electricity to Korea Electric Power Corp. and a key benchmark for retail tariffs. When it rises, electricity rates for businesses and households are likely to follow.

The increase is largely attributed to the outbreak of the Iran conflict in February. Although generators are still using liquefied natural gas secured earlier, pricing reflects average exchange rates from February and March. The weaker won since the conflict has pushed up fuel costs, driving wholesale prices higher.

Industry officials expect the upward trend to accelerate. As of January, LNG and other gas sources accounted for 31.3 percent of total power generation. Once higher-cost LNG procured after the conflict begins to be used, price pressures are expected to intensify.

Forecasts point to a sharper rise from May, with increases likely to steepen further in June and July. A similar pattern followed the outbreak of the Russia-Ukraine war in February 2022, when wholesale electricity prices climbed to 267.55 won per kilowatt-hour by December, nearly triple the previous year’s average of 93.98 won.

Yu Seung-hoon, a professor at Seoul National University of Science and Technology, said electricity prices could rise to more than double pre-conflict levels. With summer approaching and demand set to increase, he said the burden will be shared across the economy and urged power producers, the utility, businesses and households to conserve energy.


박현익 beepark@donga.com