Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Weak won fuels energy price hike concerns as state utility firms face FX losses
Electric meters operate in a residential neighborhood in Seoul, Sept. 22. Newsis
By Yi Whan-woo
A weak Korean won is raising concerns about potential increases in electricity, gas and other utility prices, as state-run energy companies face growing foreign exchange losses, industry officials said Tuesday.
These companies incur losses because they purchase energy resources, such as crude oil, in U.S. dollars but sell domestically in won, meaning that continued depreciation of the won against the dollar further amplifies losses.
Raising utility prices to compensate is seen as a viable option.
The affected companies include Korea Electric Power Corp. (KEPCO) and Korea Gas Corp. (KOGAS), whose annual foreign exchange losses are estimated at 200 billion won ($136.2 million) and 20 billion won, respectively, for every 10-won depreciation of the won against the U.S. dollar.
The local currency has persistently remained in the 1,400-won level against the U.S. dollar, which is considered a worrisome threshold but is increasingly being seen as the “new normal.”
According to the Bank of Korea, the average exchange rate for 2025 stood at 1,419.16 won per dollar as of Monday, slightly higher than it was during the 1997 Asian financial crisis (around 1,395) or the 2008 global financial crisis (approximately 1,276.4).
KEPCO and KOGAS said they are relying on stockpiled reserves, setting aside concerns about potential utility price increases.
“However, they cannot sustain this strategy for long,” an industry official said, adding that “the costs of imports under existing long-term contracts, denominated in U.S. dollars, will naturally rise, potentially leading to greater financial burdens.”