South Korea Delays Plan to Raise Power, Gas Prices

By Shinhye Kang

Oct. 9 (Bloomberg) -- South Korea, which imports almost all its fuel needs, will delay a plan to raise power and gas prices as growth eases in Asia's fourth-biggest economy.

The government will decide the timing of the increase after checking the economic situation and global oil prices, the Ministry of Knowledge Economy said in an e-mailed statement in Seoul today. The government had planned to raise gas prices by 7.8 percent in September and electricity costs by 5 percent this month.

South Korea's $970 billion economy grew 4.8 percent in the second quarter from a year earlier, the slowest pace in more than a year. The Bank of Korea cut interest rates today for the first time in four years as household spending fell after rising living costs prompted consumers to reduce purchases.

``The delay would only increase net losses at utility companies,'' said Yun Hee Do, an analyst at Korea Investment & Securities Co. ``Investors should not expect earnings of energy utilities to improve next year.''

Korea Electric Power Corp., which supplies almost all of the country's electricity, recorded a loss of 763.6 billion won ($540 million) in the three months ended June 30 compared with a profit of 266 billion won a year earlier. Korea Gas Corp., the world's biggest buyer of liquefied natural gas, posted a second-quarter loss of 4.4 billion won.

South Korea has kept electricity rates unchanged since a 2.1 percent increase on Jan. 15, 2007, to curb inflation. The government also maintained city gas prices this year. Consumer prices rose 5.9 percent in July.

To contact the reporter on this story: Shinhye Kang in Seoul at skang24@bloomberg.net;