South Korea freezes Q4 electricity rates as Kepco debt tops W200tr

South Korea's electricity rates will remain unchanged in the fourth quarter of this year (October–December), with the freeze taking effect next month. The decision comes despite Korea Electric Power Corporation's debt exceeding 210 trillion won ($153 billion) and ongoing instability in global energy prices stemming from the Middle East conflict, and aims to ease the burden on ordinary households and small businesses.

Korea Electric Power Corporation announced Monday that it would maintain the fuel cost adjustment rate for the fourth quarter at the current level of plus 5 won per kilowatt-hour.

Electricity bills in South Korea consist of a basic charge, a usage charge, a climate and environment charge, and a fuel cost adjustment rate. The fuel cost adjustment rate is determined within a range of plus or minus 5 won per kilowatt-hour, reflecting the average prices of coal, LNG and Brent crude over the preceding three months.

Korea Electric Power Corporation has held the adjustment rate at its maximum of plus 5 won per kilowatt-hour since the third quarter of 2022, when global energy prices surged following Russia's invasion of Ukraine, regardless of subsequent fluctuations in fuel costs.

While the government has maintained a freeze on electricity rates, pressure to raise them is mounting. According to the Korea Power Exchange, the system marginal price — the benchmark for the domestic wholesale electricity market — has been rising sharply in the second half of this year amid LNG supply concerns triggered by the US-Iran war. The monthly average land-based system marginal price jumped 43.8 percent, from 102.84 won per kilowatt-hour in January to 147.88 won in August.

The average for Sept. 1–8 eased slightly to 143.85 won, but remains about 40 percent higher than at the start of the year. Daily and hourly swings have been even more pronounced. The daily average price ran between 150 and 168 won from Sept. 1–4, before tumbling to the 97–106 won range over the weekend of Sept. 5–6. It then rose again to 150.38 won on Sept. 7 and 141.10 won on Sept. 8.

Korea Electric Power Corporation buys electricity on the wholesale market and sells it to households and businesses. The problem is that the wholesale system marginal price and the retail electricity rate paid by consumers are not automatically linked. When international fuel prices and the system marginal price surge and procurement costs rise, Korea Electric Power Corporation must absorb the additional costs upfront if the government freezes retail rates on grounds of inflation control or industrial competitiveness.

Korea Electric Power Corporation raised electricity rates seven times between 2022 and October 2024. In October 2024, it increased industrial rates by an average of 9.7 percent, or 16.1 won per kilowatt-hour. Rates have been frozen since then, and in April this year the utility made only structural adjustments to seasonal and time-of-use pricing, primarily for industrial customers.

Aided by the rate increases and a stabilization of international fuel prices, Korea Electric Power Corporation posted an operating profit of 13.49 trillion won last year. However, accumulated deficits and debt from prior years remain a heavy burden. As of the first half of 2026, total debt stood at 210.7 trillion won.

The National Assembly Research Service recently flagged the need to normalize electricity rates in its "2026 National Audit Issue Analysis." It warned that a prolonged gap between costs and rates would swell Korea Electric Power Corporation's debt and interest expenses, ultimately shifting the deferred burden onto future consumers through higher electricity bills or greater fiscal strain.

Adding to the pressure, a new "regional adjustment charge" category is set to be introduced within the year under the government's "regional industrial electricity rate" plan announced last month. Under that scheme, industrial electricity rates could fall by up to 10 percent depending on location — a financial burden that would fall entirely on Korea Electric Power Corporation.