[2020 National Audit] The Revival of the Korea Electric Power Corporation Subsidiaries Integration Debate

Democratic Party Rep. Kim Jeong-ho Raises Issue at Audit... "Current Structure Causes Management Inefficiency and Price Distortion"

[Asia Economy Reporter Moon Chaeseok] At the National Assembly’s audit, a claim was made that the integration of Korea Electric Power Corporation’s (KEPCO) power generation subsidiaries is necessary, drawing attention.

Consolidation of 5 Power Generation Companies into 2... Korea Hydro & Nuclear Power Reorganized as a Nuclear and Decommissioning Specialist

Source: Office of Kim Jeong-ho, Democratic Party of Korea.

Kim Jeong-ho, a member of the National Assembly’s Industry, Trade, Small and Medium Enterprises Committee from the Democratic Party of Korea, proposed a power industry restructuring plan as a solution to the inefficient management, lax governance, and overlapping investments of KEPCO’s power generation subsidiaries.

Kim suggested ▲merging the five nationwide thermal power companies into two companies divided by central and southern regions ▲focusing Korea Hydro & Nuclear Power (KHNP) as a specialized company for nuclear power and decommissioning ▲and unifying the overlapping and mixed new and renewable energy sectors such as solar, wind, biomass, and hydrogen fuel cells within each power generation company.

Source: Office of Kim Jeong-ho, Democratic Party of Korea.

Kim pointed out, "Currently, Korea’s power industry structure suffers from side effects caused by the power business restructuring that stalled at the second phase in 1999," and added, "The power industry, operated under KEPCO’s monopoly of transmission, distribution, and retail, results in various management inefficiencies and price distortions."

He stated, "Since the division of the five power generation subsidiaries, there have been many cases of decreased management efficiency such as increased fuel costs due to inefficient competition, increased congestion charges, lax management issues like expansion of investee companies and accumulated deficits, excessive overlapping overseas ventures, and duplicated R&D efforts."

Concerns over KEPCO Monopoly after Energy Transition Policy

Prime Minister Chung Sye-kyun is delivering opening remarks at the '2nd Hydrogen Economy Committee' held at the Government Seoul Office in Jongno-gu, Seoul on the 15th. Photo by Kang Jin-hyung aymsdream@

While the rationale for improving management efficiency of KEPCO’s subsidiaries is sound, there are counterarguments expressing concerns about KEPCO’s monopoly and the resulting stagnation of innovation.

This is because the National Assembly is currently proposing legislation to grant KEPCO authority over new and renewable energy power generation.

If KEPCO is selected as the obligated entity under the Hydrogen Power Supply (HPS) mandatory system to be implemented in 2022, there is even a possibility that KEPCO will monopolize all 'solar + wind + hydrogen' power generation.