KEPCO to cut power rates: source

The state-run Korea Electric Power Corp., the nation’s largest utility company, has internally decided to cut electricity rates under pressure from the political circles, according to a source.

“KEPCO will soon lower the electricity rates as it has already agreed with the government on the measure,” a company official close to the matter told The Korea Herald on condition of anonymity.

The source, however, declined to say how large the cut would be.

KEPCO has been under pressure to make a rate cut since December, when President Park Geun-hye asked utility firms to lower their energy bills, with the cost of fuel imports shrinking amid falling oil prices. 

In response to Park’s remark, the state-owned Korea Gas Corp. cut its wholesale gas price by 10.69 percent in February.

KEPCO, however, did not follow suit in the first half of the year, saying that the oil price didn’t affect the firm’s fuel import costs for power generation as much as the government suggested.

The pressure on KEPCO to lower electricity bills began to escalate again this month as the outbreak of the Middle East respiratory syndrome added to Korea’s adverse economic conditions.

“The time is ripe for KEPCO to cut the electricity bills before the summer peak in electricity demand as part of efforts to help the economy turn around,” Rep. Won Yoo-chul, chairperson of the policy committee for the ruling Saenuri Party, said Tuesday.

“The committee will hasten procedures to realize the electricity rate cut by KEPCO.”

The move toward lowering power rates has a negative impact on KEPCO’s stock price. Shares in the utility giant have remained flat for the past month, hovering around 44,000 won ($39) per share. The stock price fell 0.70 percent to 42,700 won on Wednesday.

Market watchers said KEPCO’s stock price would fall further due to worsening profitability when a rate cut is implemented.

KEPCO has enjoyed continued growth in its operating profits for the past year after it raised rates twice in 2013. Sales rose 2.4 percent on-year to 15.12 trillion won in the first three months of this year, and operating income surged 82.5 percent to 2.23 trillion won in the same period. The figures include earnings from KEPCO and its six power generation subsidiaries, including Korea Hydro & Nuclear Power Corp., the state-run nuclear power plant operator.

By Seo Jee-yeon (jyseo@heraldcorp.com)