Korea Electricity Commission Priority on a comprehensive market improvement

Moon-hwan Kim , Korea Electricity Commission chairman

The Korea Electricity Commission was established in the interests of regulatory objectivity and transparency in April 2001 for the purpose of enhancing competition in the electricity market as well as to induce private investment. Kim Moon-hwan, chairman of the Korea Electricity Commission, stressed the Commission's role as a regulatory body to maintain efficiency in the market for electrical power in the face of its dominance by the monopoly of Korea Electricity Power Corp. (KEPCO). For the present, the government is encouraging research in IT to boost the power industry's competitiveness and efficiency and to create new growth by a fusion of the power industry and information technology. In tandem with this policy, Mr. Kim stated that the Korea Electricity Commission plans to promote competition untiringly in the electricity market for the sake of its future competitiveness. He elaborated in detail on the Commission's plans for 2005, namely, boosting market efficiency, strengthening competition, and facilitating the participation of private operators. Mr. Kim said that the power industry's quality of service was among the best in the world despite it being a monopoly for thirty years until the 1990s. Nonetheless, domestic electric charges are the cheapest in the world, thanks to excellent ability of the industry's employees and its high level of technology. He asserted that the Commission will strive to solve the problems facing the Korean electricity market. The following article is an interview with Mr. Kim regarding government policy on IT investment in the power industry, an assessment of his activities since his inauguration as chairman last year, and the developmental role of the industry. Q: First off, please fill our readers in on the direction that government is trying to encourage IT investment in the power industry. A: Basically it concerns automation, digitalization, development of communication technology related to using power lines, and investment in the equipment and the solutions to make the market more competitive and efficient. We understand that the government plans to pursue R&D in with priority given to 9 types of core information technologies related to power generation. Specifically, for the purpose of enhancing the level of IT in the power industry, 500 billion won in total will be spent over the next five years. Q: What is your assessment of the power industry at present A: The national power industry is in a period of transition, whose structure is shifting from one that is monopolistic to one that is competitive. Since a basic industry reorganization plan was established in late 1999, certain aspects of the power generation function have been withdrawn from KEPCO (Korea Electric Power Corporation) in 2001. Moreover, the Korea Electricity Commission and the Korea Power Exchange (KPX) were established in the same year. In view of these changes, the Commission is undertaking a special study on improving the market that will provide a blueprint for some sweeping changes. Q: What is your take on the reorganization within the industry A: Because competition is just being introduced, it is not easy to assess the true impact of the changes that are being made, but the general industry consensus is that efficiency is on the up. Since the introduction of competition in the power generation industry April 2001, 6 power companies have earned an aggregate net profit of 1 trillion won in 2001, 1.9 trillion won in 2002, 1.9 trillion won in 2003, and approximately 1.2 trillion won during the January/September period of 2004. Also, the debt/equity ratio of these companies improved greatly from 105.1% in 2001 to 46.9% by the end of September 2004. Moreover, these companies provide a stable supply of electricity supply at a high level of service. Q: What will be the direction of the Korea Electricity Commission in 2005 A: Briefly, the Commission plans to promote competition to boost industry competitiveness. In detail, we will prepare policies to boost the efficiency of the existing monopoly, improve competition and introduce more private operators. From hereon, the Commission will place emphasis on greater transparency in regulatory policy. Q: What's your assessment of the Commission's performance since you began your second term as chairman as well as the "New Start 365 Movement" A: Since my second term began in May last year, a total of 7 committees were struck to create the kind of framework that would allow district electricity business providers to enter the market. The "New Start 365 Movement" defines the necessity of the changing role of the Electricity Commission in promoting market entry penetration by private generators, transparency on the part of the monopoly, heightened efficiency, strengthened competitiveness, and greater customer satisfaction. Through this movement, we aim to resolve the existing problems in the power market for the benefit of the entire nation.