SOUTH KOREA Law and Practice Contributed by: Michael Chang, Sang-Hyun Lee, Su-Yong Jung and Jae-Wook Ryu, Shin & Kim
Shin & Kim 23F, D-Tower (D2) 17 Jongno 3-gil Jongno-gu
Seoul 03155 South Korea
Tel: +82 2 316 4114 Fax: +82 2 756 6226 Email: shinkim@shinkim.com Web: www.shinkim.com
1. Structure and Ownership of the Power Industry 1.1 Law Governing the Structure and Ownership of the Power Industry The principal law governing the ownership and structure of the power industry in South Korea is the Electric Utility Act. It defines electricity business as including the electricity generation business, electric transmission business, electric distribution business, electric sales business and district electricity busi- ness. The Electric Utility Act also provides for permits and approvals required by each business, structure of the electricity market, permits, approvals and safety requirements for electric facilities. A distinctive feature of the South Korean electricity market is its cost-based pool structure, with market prices reflecting variable costs. The market price is determined not by price bidding but by summing the increase in actual variable costs for additional electric- ity supply (the system marginal price, known as SMP) plus a capacity price to cover fixed costs. The Korea Electric Power Corporation (KEPCO) exer- cised a monopoly over the South Korean electricity generation market until 2001, when the competitive market structure was implemented. Currently, inde- pendent power producers, including six power gen- eration public corporations (GENCOs), are engaged in the electricity generation business. Generally, enti- ties engaged in the electricity generation business and electricity sales business must trade electricity
through the Korea Power Exchange (KPX) in accord- ance with the Rules on the Operation of the Electric- ity Market. In South Korea, although the generation, transmission, distribution and supply segments of the power industry are unbundled, KEPCO has a monop- oly over the transmission, distribution and sales mar - kets, in contrast to other countries that have adopted a district monopoly system for the transmission and distribution markets or a competitive system for elec- tricity sales. 1.2 Principal State-Owned or Investor-Owned Entities As noted in 1.1 Law Governing the Structure and Ownership of the Power Industry , KEPCO has a monopoly over the transmission, distribution and sales markets, and GENCOs are the principal entities in the generation market. KEPCO, a publicly listed market-based company, was established under the Korea Electric Power Cor- poration Act. Its major shareholders are the Korean Development Bank (about 33%), a 100% govern- ment-owned bank, and the South Korean government (about 18%), collectively holding 51% of the shares. The GENCOs are as follows. • Thermal generation companies:
(a) Korea South-East Power Co Ltd; (b) Korea Midland Power Co Ltd; (c) Korea Western Power Co Ltd; (d) Korea Southern Power Co Ltd; and
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