The hands that set electricity prices — the formula, the limits and the government's permission

In September 2026, a notice went up on the website of KEPCO (Korea Electric Power Corporation). It announced the fuel cost adjustment rateFuel Cost Adjustment Charge A bill item that passes changes in generation fuel prices through to electricity bills. Each month it adds usage multiplied by the fuel cost adjustment rate. Glossary → for the fourth quarter (Q4). By the calculation, 7.3 won per kWh (won is the Korean currency) should have been added. But the last line of the notice said 5.0 won.⁴Source 4KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026)See in sources →4 KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026)

The Q3 notice, three months earlier, went the other way. By the calculation, the rate should have been −3.4 won. Instead, 5.0 won stayed in place.⁵Source 5KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation).See in sources →5 KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation).

Once it rose less than it should have. Once it didn't fall at all. Both look like the formula was broken. In fact, in both, a device written into the terms was at work. Once you solve this puzzle, you can see what actually stopped when you read a "rate freeze" headline. Let's solve it one piece at a time.

What is the fuel cost adjustment rate?

The price of the coal and gas that power plants burn goes up and down. The fuel cost adjustment rate is the amount added to, or taken off, each 1 kWh of electricity to reflect those swings. Like the fuel surcharge on a plane ticket, it is listed separately from the rest of the bill and changes every three months.

This rate does not go through a meeting each time, the way a big tariff change does. It moves every quarter by a formula set in December 2020 and used from January 2021.⁷Source 7Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation)See in sources →7 Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation)

How does the formula work?

It takes five steps.⁷Source 7Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation)See in sources →7 Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation)

• Measure the fuel price: KEPCO works out the actual fuel cost from the price of the fuel the whole country brought in over three months, from four months to two months before the month the rate applies (trade-statistics prices: average import prices by fuel, in won, published by the Korea Customs Service).⁹Source 9KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.See in sources →9 KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.
• Compare with the baseline: it takes the difference from a fuel price fixed in advance (the reference fuel cost). Then it multiplies by a number that turns a fuel price (won per kg of fuel) into a per-kWh rate (the conversion factor).
• Apply the limit: the rate is cut so it cannot go more than 5 won up or 5 won down.
• Government call: the government can stop (hold back) the change.^*1More precisely *1The terms (Annex 8) say that when fuel costs change sharply, or may do so, because of a surge in international fuel prices or exchange rates, KEPCO follows a notice from the minister temporarily holding back the rate. Government documents called this the "government reservation clause."*1 The terms (Annex 8) say that when fuel costs change sharply, or may do so, because of a surge in international fuel prices or exchange rates, KEPCO follows a notice from the minister temporarily holding back the rate. Government documents called this the "government reservation clause."⁸Source 8Ministry of Trade, Industry and Energy, *Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized* (「원가연계형 요금제 등 합리적 전기요금 체계개편안 확정」, press reference material, 2020-12-17; unofficial translation).See in sources →8 Ministry of Trade, Industry and Energy, *Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized* (「원가연계형 요금제 등 합리적 전기요금 체계개편안 확정」, press reference material, 2020-12-17; unofficial translation).
• Notice: KEPCO announces the final rate.

The formula produces a value first, and then the limit and the government trim that value.

This order was confirmed from government announcements and KEPCO notices; we could not check the full text of the operating guidelines.^*2More precisely *2In the original design (2020), the reference fuel cost was based on the average fuel cost of the previous year. The same design also had a rule that no adjustment is made if the change in a quarter is within 1 won per kWh. This piece could not confirm whether both rules still hold today.*2 In the original design (2020), the reference fuel cost was based on the average fuel cost of the previous year. The same design also had a rule that no adjustment is made if the change in a quarter is within 1 won per kWh. This piece could not confirm whether both rules still hold today.

Why did 7.3 won become 5.0 won in Q4?

Let's follow the numbers.⁴Source 4KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026)See in sources →4 KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026)

• Actual fuel cost → 549.64 won/kg
• Reference fuel cost → 494.63 won/kg
• Difference → 55.01 won
• × conversion factor 0.1335 → about 7.3 won/kWh
• Hits the 5-won limit → 5.0 won/kWh

The formula pointed to 7.3 won, but the upper limit blocked it.

Why didn't it fall in Q3?

Q3 was the reverse. By the formula, the rate should have dropped to −3.4 won/kWh. But the government, citing KEPCO's financial situation and amounts not yet passed on (this piece could not confirm what that amount is), told KEPCO to keep using the previous quarter's value (how this reason fits the hold conditions in the terms, this piece could not confirm), so +5.0 won stayed in place.⁵Source 5KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation).See in sources →5 KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation). This is a case of the stopping clause actually being used.

Now two devices come into view. One is the upper and lower limit, which cuts the rate so it cannot go outside 5 won up or 5 won down. The other is the government hold, which pins the rate in place whichever way the formula points.

Does the blocked money disappear?

At the very least, they are not included in that quarter's bill. That goes for both the amount over the limit and the amount held back. The terms (Annex 8) list both as amounts to be settled later: KEPCO submits an accountant-checked calculation to the government and settles them cumulatively in its cost base under the after-the-fact settlement rule.⁹Source 9KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.See in sources →9 KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected. When, and how much at a time, they reach the bill, this piece could not confirm.

So the fuel cost adjustment charge does link fuel prices to the bill, but not directly. It is calculated from a three-month average that ends two months back, so it follows late; the limit keeps the rate within 5 won up or down; and a hold stops it. If, in a year when fuel prices jumped, the bill did not rise as much, the difference stays in KEPCO's profit and loss for that quarter. Under the terms it becomes an amount to be settled later; when, and how much at a time, it reaches the bill, this piece could not confirm.

How much is this worth to my household?

Take a household that uses 300 kWh a month.

• Actual rate of 5.0 won → 1,500 won a month
• If it had been 7.3 won, as the Q4 formula said → 2,190 won (more than the 1,500 won actually charged)
• If it had been −3.4 won, as the Q3 formula said → 1,020 won taken off (compared with the 1,500 won actually charged, a little over 2,500 won less)

Same home, same usage, yet the single Q3 government hold makes a gap of a little over 2,500 won a month. On top of that come the Electric Power Industry Basis Fund levy and value-added tax.

Who approves the tariff table itself?

Setting aside the fuel cost adjustment rate, the road to changing the tariff table itself is longer.

Electricity prices are written into a document that sets out the terms on which KEPCO sells power (the Basic Supply Terms and Conditions, "the terms" from here on). KEPCO cannot change these terms on its own. It needs the minister's approval (the government's permission). There are two steps before approval, and one is review by the Electricity Regulatory CommissionElectricity Regulatory Commission The Electricity Regulatory Commission is a government body that deliberates on fair competition and consumer protection in the power sector and adjudicates disputes between electricity businesses. Glossary →.¹Source 1Electric Utility Act (전기사업법) Art. 16(1)–(2) (approval of the basic supply terms· Electricity Regulatory Commission review)See in sources →1 Electric Utility Act (전기사업법) Art. 16(1)–(2) (approval of the basic supply terms· Electricity Regulatory Commission review) The standard for approval is "a fair cost plus a fair return" — in other words, add only a reasonable profit on top of what was actually spent.²Source 2Enforcement Decree of the Electric Utility Act (전기사업법) Art. 7(1) (approval criteria)See in sources →2 Enforcement Decree of the Electric Utility Act (전기사업법) Art. 7(1) (approval criteria)

The other is consultation. Electricity prices are also a public utility charge, so the minister must also consult in advance with the Minister of Economy and Finance, who runs the national budget.³Source 3Price Stabilization Act (물가안정에 관한 법률) Art. 4(1) (amended 1 Oct 2025, consultation with the Minister of Economy and Finance)See in sources →3 Price Stabilization Act (물가안정에 관한 법률) Art. 4(1) (amended 1 Oct 2025, consultation with the Minister of Economy and Finance) Both the review and the consultation come before approval, but the law does not say which of the two comes first.

Only after approval does the rate on your bill change. The 324th Electricity Regulatory Commission meeting, held on May 26, 2026, also reviewed in writing one request to approve changes to KEPCO's terms.⁶Source 6Electricity Regulatory Commission (전기위원회), results of the 324th meeting (26 May 2026, in writing)See in sources →6 Electricity Regulatory Commission (전기위원회), results of the 324th meeting (26 May 2026, in writing) Behind every tariff headline, there is always a meeting like this.

What should you ask when you see a "freeze" headline?

When a headline says "fuel cost adjustment rate frozen," ask two things. What value did the formula point to? And was it stopped by the limit, or by a hold?

A KEPCO notice lists the "required rate" and the "final rate" together. The difference between them is the share not included in that quarter's bill. So a "freeze" headline does not mean the fuel cost burden has gone away.

What to watch when you use these numbers

If you deal with the fuel cost adjustment rate in a report or an article, check three things.

• The "required rate" and the "final rate" in a notice are different numbers. The first is the value the formula pointed to; the second is the value actually charged on the bill.
• The actual fuel cost is the average of three months, from four months to two months before the month the rate applies. It is not that month's fuel price but prices more than two months old that set this quarter's rate.
• This piece could not check the full text of the operating guidelines. The order of the formula relies on government announcements and KEPCO notices.

So what do the two notices tell us?

Let's go back to the two notices we started with. The last line of both is 5.0 won. In Q4, the formula said to raise it more, but the limit blocked it. In Q3, the formula said to lower it, but the government held it in place. The first one charged less than the formula called for; the second, more.

Even the same 5.0 won only shows what stopped it when you read it next to the "required rate" line. That stop does not break the rules. It is a device built into them.

Behind one line on the bill, then, there is a notice; behind the notice, a formula and a limit; and above them, the minister's approval. These rules were not there from the start either. The fuel cost adjustment formula was set in December 2020 and used from January 2021, and the road to changing the terms is written in the law. The rules behind the tariff table were also set by someone, on some day.

Words in this piece

• fuel cost adjustment chargeFuel Cost Adjustment Charge A bill item that passes changes in generation fuel prices through to electricity bills. Each month it adds usage multiplied by the fuel cost adjustment rate. Glossary → — the line on the bill that passes swings in generating-fuel prices into the bill, at a rate set each quarter. It has an upper and lower limit and a government hold.
• Electricity Regulatory CommissionElectricity Regulatory Commission The Electricity Regulatory Commission is a government body that deliberates on fair competition and consumer protection in the power sector and adjudicates disputes between electricity businesses. Glossary → — the government commission that reviews tariff terms before they are approved. It is charged with protecting electricity users and keeping competition fair.
• kWhkW and kWh A kW (kilowatt) is a unit of power: how hard electricity is made or used at a moment. A kWh (kilowatt-hour) is a unit of energy: how much is made or used over time. Glossary → — the unit for how much electricity was used. The fuel cost adjustment rate is charged per unit.

¹Source 1Electric Utility Act (전기사업법) Art. 16(1)–(2) (approval of the basic supply terms· Electricity Regulatory Commission review)See in sources →1 Electric Utility Act (전기사업법) Art. 16(1)–(2) (approval of the basic supply terms· Electricity Regulatory Commission review): Electric Utility Act (전기사업법) Art. 16(1)–(2) (approval of the basic supply terms · Electricity Regulatory Commission review) https://www.law.go.kr/법령/전기사업법/제16조 ²Source 2Enforcement Decree of the Electric Utility Act (전기사업법) Art. 7(1) (approval criteria)See in sources →2 Enforcement Decree of the Electric Utility Act (전기사업법) Art. 7(1) (approval criteria): Enforcement Decree of the Electric Utility Act (전기사업법) Art. 7(1) (approval criteria) https://www.law.go.kr/법령/전기사업법시행령/제7조 ³Source 3Price Stabilization Act (물가안정에 관한 법률) Art. 4(1) (amended 1 Oct 2025, consultation with the Minister of Economy and Finance)See in sources →3 Price Stabilization Act (물가안정에 관한 법률) Art. 4(1) (amended 1 Oct 2025, consultation with the Minister of Economy and Finance): Price Stabilization Act (물가안정에 관한 법률) Art. 4(1) (amended 1 Oct 2025, consultation with the Minister of Economy and Finance) https://www.law.go.kr/법령/물가안정에관한법률/제4조 ⁴Source 4KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026)See in sources →4 KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026): KEPCO (Korea Electric Power Corporation), notice: Q4 2026 fuel cost adjustment rate (21 Sep 2026) https://www.kepco.co.kr/home/media/newsroom/notice/boardView.do?boardMngNo=14&boardNo=2759 ⁵Source 5KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation).See in sources →5 KEPCO (Korea Electric Power Corporation), *Breakdown of the Q3 2026 fuel cost adjustment rate* (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation).: KEPCO (Korea Electric Power Corporation), ^*3More precisely *3Breakdown of the Q3 2026 fuel cost adjustment rate**3 Breakdown of the Q3 2026 fuel cost adjustment rate*(https://www.kepco.co.kr/home/media/newsroom/notice/boardView.do?boardMngNo=14&boardNo=2673) (「2026년 3분기 연료비조정단가 산정내역」, notice, 2026-06-19; unofficial translation). ⁶Source 6Electricity Regulatory Commission (전기위원회), results of the 324th meeting (26 May 2026, in writing)See in sources →6 Electricity Regulatory Commission (전기위원회), results of the 324th meeting (26 May 2026, in writing): Electricity Regulatory Commission (전기위원회), results of the 324th meeting (26 May 2026, in writing) https://www.korec.go.kr/notice/result/selectNoticeList.do ⁷Source 7Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation)See in sources →7 Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation): Ministry of Trade, Industry and Energy (산업통상자원부), press release *Cost-linked electricity tariff system* (「원가연계형 요금체계」, 17 Dec 2020, unofficial translation) https://www.motir.go.kr/kor/article/ATCL3f49a5a8c/163646/view ⁸Source 8Ministry of Trade, Industry and Energy, *Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized* (「원가연계형 요금제 등 합리적 전기요금 체계개편안 확정」, press reference material, 2020-12-17; unofficial translation).See in sources →8 Ministry of Trade, Industry and Energy, *Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized* (「원가연계형 요금제 등 합리적 전기요금 체계개편안 확정」, press reference material, 2020-12-17; unofficial translation).: Ministry of Trade, Industry and Energy, ^*4More precisely *4Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized**4 Plan to reform the electricity tariff system on rational lines, including a cost-linked tariff, finalized*(https://www.motir.go.kr/kor/article/ATCL3f49a5a8c/163646/view) (「원가연계형 요금제 등 합리적 전기요금 체계개편안 확정」, press reference material, 2020-12-17; unofficial translation). ⁹Source 9KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.See in sources →9 KEPCO (Korea Electric Power Corporation), *Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions* (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.: KEPCO (Korea Electric Power Corporation), ^*5More precisely *5Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions**5 Operating guidelines for the fuel cost adjustment charge, Annex 8 of the Electricity Supply Terms and Conditions*(https://cyber.kepco.co.kr/ckepco/front/jsp/CY/D/C/CYDCHP00409.jsp) (「전기공급약관 별표 8 연료비조정요금 운영지침」, terms annex, web posting with last supplementary provision dated 2023-05-16, unofficial translation). This piece checked the wording that uses trade-statistics prices, item 2.4) (emergency hold of the adjustment charge) and section 3 (settlement: amounts over the limits and amounts held back, settled after the fact under Art. 25 of the tariff calculation standards) in this posted version (read 30 Oct 2026), and could not confirm whether later amendments are reflected.