KEPCO Retail Division Plan Eventually Scrapped

The plan to divide the retail sector of the Korea Electric Power Corporation (KEPCO), as part of restructuring state-owned public enterprises, was scrapped.

This decision therefore will have significant impact on other privatization plans as well as shift the overall restructuring framework of the electricity sector that lasted for about five years since 1999.

The Korea Tripartite Commission (KTC), which directly reports to the president, accepted the research results by the so-called joint research group on the electricity industry restructuring and adopted a statement to recommend the government to cancel the plan to divide KEPCO’s distribution sector at the special committee meeting on restructuring the public sector on Thursday.

“Despite the introduction of market principles, the electricity market will ultimately become monopolized as it needs enormous financial resources and long-term construction,” said Ahn Young-soo, Chairman of the Special Committee on Public Sector Restructuring. “The division plan of the retail sector should be suspended given the nature of the electricity industry.”

“Instead, the Special Committee will recommend the Ministry of Commerce, Industry and Energy (MOCIE) to introduce separate entities in order to promote internal competition,” he added.

MOCIE, responsible for electricity industry reform, also reported to scrap the division policy after the Korea Tripartite Commission’s announcement.

“The ministry respects the opinion of the KTC and will introduce the separate entity system responsible for distribution, instead of pursuing the division plan,” briefed Minister Lee Hee-beom at the Gwacheon Government Complex.

The Korean government had planned to split the power distribution division of the KEPCO into six units in April 2004 to break the monopoly and promote competition.

However, the plan was eventually cancelled after the indefinite delay, due to fierce opposition of the KEPCO Labor Union and the demand for reconsideration by the Presidential Transition Committee in February 2003.

The purpose of the plan was to divide the KEPCO’s retail sector that distributes generated electricity to regions. The suspended plan to divide retail sector was originally designed to introduce market principles to the electricity distribution while the division of generation sector intended to bring competition among suppliers.

Ki-Jeong Ko Jong-Hoon Lee koh@donga.com taylor55@donga.com