Korea Electric Power Corp. (Kepco), a state-run firm with a monopoly on power transmission and distribution, reported a record-high operating loss of 7.78 trillion won ($6.06 billion) in the first quarter of this year.
The figure is much larger than the company’s operating loss of 5.86 trillion won logged for the whole of last year. Considering that its 2021 annual loss was the worst ever, the third-quarter loss is astronomical.
If this trend continues, its operating loss for the year will exceed 30 trillion won, about half of last year’s annual sales of 60 trillion won.
Kepco issued 9.67 trillion won worth of bonds in the first quarter to raise emergency funds. This is close to 10.4 trillion won worth of its bonds issued for the whole of last year.
It also seeks to sell off its stakes in listed subsidiaries and real estate, but retrenchment to this extent cannot be a fundamental solution. A private company with such dire results would have been already declared bankrupt.
Kepco, once an excellent company which made 7 trillion won in profits in 2016, is now mired in losses. This is due largely to the Moon Jae-in administration’s policy failure. It gave up on nuclear energy because it saw nuclear plants as too dangerous.
Though the cost of generating power using nuclear energy is much lower than other energy sources, the government continued reducing the share of nuclear power in the country’s energy mix. It strongly pushed for renewable energy projects, but solar and wind are unstable and insignificant given Korea’s geographical characteristics. It imported fuels such as crude oil, liquefied natural gas and coal to replace nuclear output. Production costs inevitably climbed.
And yet it froze electric charges apparently to avoid losing votes in elections. To make matters worse, international energy prices have recently surged.
Increasing the use of nuclear energy again would be desirable, but it is not straightforward. The nuclear power plant Kori 1 was shut down years ago, and Wolsong 1 was closed early. The operations of Shin Hanul 2 and Shin Kori 5 and 6 were delayed. All of the plans to build new nuclear plants were scrapped.
Parts companies closed down, and the nation‘s pool of nuclear energy engineers and experts shrank as well.
The nuclear industry, which took decades to grow to a world-class level, crumbled in just five years.
To add insult to injury, the Moon administration rushed to open the Korea Institute of Energy Technology this year, though the construction of the campus was incomplete. The university was Moon’s election pledge to win votes. Kepco bears half of the KIET’s operating expenses, and its burden is expected to amount to 800 billion won over 10 years.
Kepco did not increase fuel unit costs for electricity because the Moon administration stopped it from doing so. A system to link fuel prices to electricity fees was in place but of no use. The Moon government passed the unpopular measure of reflecting fuel cost increases to the Yoon Suk-yeol administration.
With the Kepco‘s losses spiraling out of control, increasing the amount customers pay has become unavoidable. The Yoon administration must activate the system of linking fuel prices to how much users pay. It must not hang on to immediate popularity, but persuade the people about the inevitability of raising electricity fees.
The way to solve Kepco’s mounting losses is either to raise fees or to reduce them with tax. Either way, the people foot the bill. But nobody, including Moon, has given even a word of apology so far. The damage from his nuclear phase-out policy is too grave to forget and move on. Those who forced Kepco into a state of chronic deficit should be held liable.
By Korea Herald (email@example.com