Korea Electric Power : Updates on the Unit Price of the Fuel Cost Adjusted Charge (after changing base fuel cost for 2022)

UPDATES ON UNIT PRICE OF THE FUEL COST ADJUSTED CHARGE

For the three-month period from January 2022 to March 2022

December 2021

1. Calculation details of the Actual Fuel Cost and the Base Fuel Cost

The formula for calculating the amount of the Actual Fuel Cost is by multiplying (i) and (ii) below for each type of fuel, bituminous coal, LNG and Bunker C oil and then summing up those multiplied values, thus drawing out the average fuel price.

1. the average of monthly fuel prices from three preceding months from one month before the start of each period as posted by the Korea Customs Service (refer to the Table 1)
2. the Scale Factor which is the weighted value for each type of fuel considering the calorific value and the input ratio (refer to the Table 2)

The Base Fuel Cost is the past twelve-month average fuel price of bituminous coal, LNG and Bunker C oil as posted by the Korea Customs Service. For 2022, the twelve-month average fuel price is Won

338.87 per kilogram measured by taking the average of monthly fuel prices from twelve preceding months from December 2020 to November 2021.

Table 1. The average of monthly fuel prices for the three-month period from September 2021 to November 2021

Before customs duties, individual consumption tax and surcharges, in Won/kg

	Fuel type		September 2021		October 2021		November 2021		Average
	Bituminous			122.14			131.46			153.82			135.81
	Coal
LNG	667.99		791.08		945.52		801.53
	Bunker C oil			557.85			639.75			632.33			609.98
After customs duties, individual consumption tax and surcharges*, in Won/kg
	Fuel type		September 2021		October 2021		November 2021		Average
	Bituminous			168.14			177.46			199.82			181.81
	Coal
LNG	703.83		822.70		970.78		832.43
	Bunker C oil			607.58			691.94			684.30			661.27

• In accordance with Article 50 of the Customs Act, Article 1 of the Individual Consumption Act and Article 24 of Enforcement Decree of the Petroleum and Alternative Fuel Business Act

Table 2. The Actual Fuel Cost of the three-month period from September 2021 to November 2021

				Average Price after tax, etc.		Scale Factor		Multiplied Value
	Bituminous			Won 181.81/kg			× 0.9649 (α)			Won 175.42/kg
	Coal
LNG		Won 832.43/kg		× 0.3163 (β)		Won 263.33/kg
	Bunker C oil			Won 661.27/kg			× 0.0117 (γ)			Won 7.74/kg
Actual Fuel Cost (Total of multiplied values)					Won 446.49/kg

2. Calculation details of the Unit Price of the Fuel Cost Adjusted Charge

The Unit Price of the Fuel Cost Adjusted Charge is calculated by multiplying (i) and (ii) below.

1. the difference between the Base Fuel Cost and the Actual Fuel Cost (refer to the Table 3)
2. the Conversion Factor which is the input amount in kilograms to generate one kilowatt- hour of electricity. (refer to the Table 4)

However, any value that exceeds Won ±5 per kilowatt-hour will not be reflected in the Fuel Cost Adjusted Charge. Also, there is a quarterly cap on the Unit Price of the Fuel Cost Adjusted Charge to be (i) no less than Won ±1 per kilowatt-hour and (ii) no greater than Won ±3 per kilowatt-hour as compared to the immediately preceding quarter. (refer to the Table 4)

Table 3. The difference between the Base Fuel Cost and the Actual Fuel Cost

Actual Fuel Cost (a)	Base Fuel Cost (b)	Difference (a - b)
Won 446.49/kg	Won 338.87/kg	Won 107.62/kg

Table 4. Calculations on the Unit Price of the Fuel Cost Adjusted Charge

Before the caps

Difference (a) Conversion Factor (b) Unit Price of the Fuel Cost Adjusted Charge (a×b)

Won 107.62/kg		Won 0.1376 kg/kWh			Won 14.8/kWh
After the caps
After the ±5 cap		After the quarterly cap		Unit Price of the Fuel Cost
		▶		▶	Adjusted Charge
Won 5.0/kWh		Won 3.0/kWh		Won 3.0/kWh

3. The Unit Price of the Fuel Cost Adjusted Charge to be applied for the first quarter of 2022

The Unit Price of the Fuel Cost Adjusted Charge to be effective from January 2022 to March 2022 is Won 0 per kilowatt-hour pursuant to Article 2.4) of the Guidelines for Operation of the Unit Price of the Fuel Cost Adjusted Charge under the Terms and Conditions for Electricity Supply. The Guidelines state that if the Korean government notifies us that it does not wholly or partially adjust the quarterly Fuel Cost Adjusted Charge in case of extenuating circumstances, the Unit Price of the Fuel Cost Adjusted charge shall be applied in accordance with such notification.

The government notified the Unit Price of the Fuel Cost Adjusted Charge to be effective for the first quarter is Won 0 per kilowatt-hour, same as the fourth quarter of 2021, citing that even though the Unit Price of the Fuel Cost Adjusted Charge for the first quarter of 2022 was derived to be equal to Won

29.1 per kilowatt-hour due to the rapid increase in global fuel prices, there is the need to alleviate the hardship of the Korean people caused by the prolonged economic effects of Covid-19 pandemic and high inflation rates.