[Asia Economy Sejong=Reporter Dongwoo Lee] A bill to prevent Korea Electric Power Corporation (KEPCO) from funneling business opportunities to its retired employees' subsidiary for about 30 years has been proposed in the National Assembly. Until now, KEPCO has been criticized for 'favoring its own people' by awarding these business opportunities through private contracts.
On the 3rd, Park Young-soon, a member of the National Assembly's Industry, Trade, Small and Medium Enterprises and Startups Committee from the Democratic Party of Korea, announced that he has taken the lead in proposing the "Partial Amendment to the Korea Electric Power Corporation Act," which prohibits KEPCO from subcontracting the electricity supply business in island areas entrusted by the government and requires KEPCO to perform it directly.
Under current law, electricity supply to island areas is a business entrusted to KEPCO by the government and is a representative public interest project that provides stable electricity to energy welfare-deprived areas such as islands, remote areas, and rural regions. However, KEPCO has not performed the entrusted business directly but has subcontracted it. In particular, KEPCO has funneled work to JBC (formerly Jeonwoo Industrial Co., Ltd.), a company 100% owned by the Korea Electric Power Veterans Association (Jeonwoohoe), a retired employees' organization of KEPCO, for 27 years since 1996.
JBC is reported to have generated about 833 billion KRW in sales over the past 10 years. Of these sales, 96% (800.6 billion KRW) were obtained through contracts with KEPCO. As of last year, 8 out of 10 executives were former KEPCO employees. JBC has paid dividends averaging about 1.5 billion KRW annually to the KEPCO Veterans Association from the profits earned through contracts with KEPCO.
As KEPCO's practice of subcontracting and funneling work continued, the Ministry of Economy and Finance amended the "Public Enterprise and Quasi-Governmental Institution Contract Office Regulations" in 2019 to include retired employees' organizations and their member companies and subsidiaries in the list of entities prohibited from private contracts with public enterprises. Subsequently, KEPCO announced it would switch the island area power generation business from private contracts to open competitive bidding, but it extended contracts from January 2021 to December 2022 and it has been confirmed that JBC has maintained the business up to this month this year.
The amendment stipulates that although KEPCO has performed the rural electricity supply business entrusted by the government under the "Act on Promotion of Electricity Supply Business in Rural and Fishing Villages," it will now be defined as KEPCO's own business to prevent subcontracting it to other companies. Since island power generation is an essential public interest business that incurs an annual loss of about 100 billion KRW but is preserved through the electricity infrastructure fund paid by the public, KEPCO must directly manage the business for energy welfare.
A KEPCO official said, "Although the contract with JBC expired in December last year, it has been automatically extended, and the business is being conducted as before until a new contract is signed," adding, "We are reviewing future response plans regarding the bill proposed in the National Assembly."
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