A "pitch-dark situation" in which the public cannot know how electricity rates—directly tied to people's daily lives—are calculated continues. Disclosing cost information for electricity rates is a legal obligation that must be fulfilled every year, but Korea Electric Power Corporation (KEPCO) has not released the relevant information since 2023. KEPCO said it is because the energy authorities (the former Industry Ministry, now the Ministry of Climate, Energy and Environment) are "conducting a verification of possible overestimation of the total electricity rate cost." Experts noted that the toothless "fuel cost adjustment system" is blocking cost disclosure.
According to the government on the 7th, the Ministry of Economy and Finance has since 2010 required cost information for six public charges—electricity, city gas, rail fares, wide-area water supply fees, road tolls, and postal fees—to be disclosed on each public institution's and the consumer agency's websites. The measure is intended to increase transparency by publishing how public charges are decided and the related cost information, and to curb indiscriminate hikes in public charges.
Accordingly, major public institutions such as Korea Railroad Corporation (KORAIL), the Korea Expressway Corporation, and the Korea Gas Corporation disclose not only cost items such as fuel costs, labor costs, and administrative expenses that go into calculating charges, but also the pricing methodology. However, KEPCO and Korea Post have not disclosed cost information since the last release in 2022, leaving the status at "information not disclosed."
KEPCO said, "We cannot disclose it yet because the energy authorities are verifying the electricity rate settlement report." This is because in Oct. 2023 the Board of Audit and Inspection pointed out that "KEPCO overestimated the total electricity rate cost" and called for a thorough verification.
According to the National Assembly Budget Office, KEPCO explained that "information disclosure keeps being delayed as the former Industry Ministry's internal review and verification procedures drag on." The office criticized KEPCO, noting that "the Korea Gas Corporation is disclosing cost information even under similar circumstances."
In response to such criticism, the energy authorities said they are "reviewing how to reflect the 'fuel cost adjustment system' introduced in 2021 in the total cost, and once the review is finished, the cost of electricity rates can be disclosed."
The fuel cost adjustment system cited by the energy authorities is a scheme that reflects, on a quarterly basis, fluctuations in fuel costs—such as oil, coal, and liquefied natural gas (LNG)—used to generate electricity in the electricity rate. Initially, the adjustment range was up to ±3 won per kWh compared with the previous quarter, but it was later expanded to ±5 won. However, contrary to the intent of "adjusting electricity rates according to oil price rises and falls," the fuel cost adjustment system remains largely ineffective.
For example, West Texas Intermediate (WTI) and Dubai crude surged from the $40 range in 2021 to the $120 range in the first quarter of 2022. This was because the Organization of the Petroleum Exporting Countries and its partner group OPEC+ continued production cuts even as oil demand recovered after COVID-19. During the same period, liquefied natural gas (LNG) prices more than quadrupled due to Russia's invasion of Ukraine.
Nevertheless, the government froze the fuel cost adjustment unit price, citing price stability and the COVID-19 response. KEPCO requested a "+3 won" increase in the fuel cost adjustment unit price in both the first and second quarters of 2022, but the government set both at "0 won." Critics also said that "the government avoided raising electricity rates ahead of the March 2022 presidential election and the June local elections."
By contrast, since the fourth quarter of 2023, even though fuel costs fell, the magnitude of the decline was not properly reflected. KEPCO submitted fuel cost adjustment unit prices in the range of -1.8 won to -5 won from the fourth quarter of 2023 until recently, but the energy authorities reportedly set it instead at "+5 won." Considering that KEPCO's debt ratio surged from 113.4% in 2019 to 619.3% in 2024, the government has maintained the fuel cost adjustment unit price at "+5 won" for 14 consecutive quarters.
Experts said, "The government introduced the fuel cost adjustment system but has been lukewarm in actually adjusting rates, so the system is not functioning as intended," adding, "With the fuel cost adjustment charge and cost disclosure operating separately, transparency in rate calculation is suffering and public trust is being lost."
Experts said the fuel cost adjustment system should be properly used and, if necessary, realistic electricity rates should be pursued.
Cho Hong-jong, a professor of economics at Dankook University and president of the Korea Resource Economics Association, said, "LNG prices rose sharply due to the Russia-Ukraine war, but that was not reflected at the time, and consumers are now shouldering the amount that includes interest on the liabilities," adding, "It is inequitable that future consumers are repaying amounts that were not collected from consumers in the past." He added, however, "Barring rate normalization, there is no way to resolve KEPCO's current deficit and increase renewable energy."
The National Assembly Budget Office also pointed out this reality and recommended that KEPCO disclose transparent cost information. The office said, "KEPCO failed to raise electricity rates in proportion to increases in materials and supplies costs such as surging oil prices, causing massive losses and a sharp rise in the debt ratio," adding, "This is why public interest has grown." It added, "Not disclosing costs undermines the transparency and credibility of electricity rates and infringes on the public's understanding and right to know."