Power Sector To Be Competitive

The Ministry of Commerce, Industry and Energy (MOCIE) is reportedly reviewing introducing competition to the sales sector of the power industry.

A key official of the presidential transition committee said on Saturday that the ministry recently briefed the committee that it would seek to restructure state-run energy corporations in charge of the power and gas industries and regional heating.

According to the ministry’s plan, a competitive system will be introduced to the sales sector of the power industry by allowing a subsidiary company in charge of generating electricity, which is already under a competitive system, to handle sales as a sideline. The ministry is planning to establish a roadmap that will outline the privatization of public corporations in charge of electricity generation and sales in the first half of this year.

“Since the introduction of competition to the electricity generation sector, fuel costs have decreased by five percent each year and the debt-to-equity ratios of power generation subsidiaries have also improved,” an MOCIE official said in a report to the transition committee. “With the introduction of a competitive system to its sales sector, fuel efficiency will improve and customers will have more choices.”

On power transmission and distribution, the ministry plans to allow the Korea Electric Power Corporation (KEPCO) to maintain its exclusive rights, according to sources.

The ministry also plans to complete the restructuring roadmap by the end of the year in an attempt to bring in competition in the introduction and sales-related businesses of the gas industry and to allow consumers and corporations to introduce or sell gas products without going through KEPCO.

On the facility sector, the ministry plans to reform its management by actively participating in private sector investment and improving the ownership and governance structure of the Korea Gas Corporation to turn it into a major global energy company.

Regarding district heating, the ministry says that the Korea District Heating Corporation should remain public for the time being.

On the possibility of merging the Korea National Oil Corporation, the Korea Coal Corporation and the Korea Resources Corporation, the ministry says that they should remain independent entities. However, the ministry plans to let the Korea National Oil Corporation handle the development-related businesses on its own when the daily oil production exceeds 300,000 barrels per day and seek privatization when the production level reaches 500,000 barrels per day.

The Korea Coal Corporation plans to come up with a restructuring plan in the first half of this year in a bid to improve its management, and the Korea Resources Corporation plans to become a company specializing in developing natural resources by reducing its domestic businesses and focusing on natural resources development projects overseas, according to the MOCIE’s plan.

A key official of the transition team said, “We’ll review the details of the MOCIE’s plan soon and finalize the direction of public enterprise reorganization after the new administration takes office.”

ditto@donga.com