Government Weighs Establishment of "Korea Power Generation" as Governance Structure Becomes Central Issue

[The Future of Integrated Power Generation] Government Favors "100% KEPCO Subsidiary" Model
Ruling Party Warns of "Financial Burden on KEPCO"... Proposes Bill for "Independent, Government-Owned Public Enterprise"

The governance structure of "Korea Power Generation," a new integrated entity that would combine the five major power generation companies, has emerged as a new point of contention. The government had initially planned to launch the integrated corporation as a subsidiary fully owned (100% stake) by Korea Electric Power Corporation (KEPCO). However, debate has arisen after members of the ruling party introduced a draft bill proposing the establishment of an independent public corporation owned directly by the government.

According to the government and the National Assembly on September 16, Assemblyman Park Hae-cheol of the Democratic Party of Korea sponsored the Korea Power Generation Corporation Act on September 7, which stipulates that the government would contribute 100% of the corporation’s capital. Eleven Democratic Party lawmakers co-sponsored the bill.

Park’s office explained that if Korea Power Generation remains a KEPCO subsidiary while KEPCO’s liabilities now exceed 200 trillion won, the financial burden from the power generation division could continue to be consolidated onto KEPCO. They also pointed out that if only the five power generators are integrated without addressing the electricity rate issue, Korea Power Generation may have limited financial capacity to invest in future businesses, such as renewable energy. There were further arguments that an independent public entity is needed as part of ongoing restructuring in the power industry. Since the division of the power generation sector into five companies in 2001, each remained a KEPCO subsidiary, and a genuine competitive system failed to take root.

There is a growing argument that the ownership and governance structure of KEPCO and the power generation sector should be redesigned in light of this integration. However, it is uncertain whether the independent public entity proposal will immediately spell the end of the KEPCO subsidiary system. Transferring the five power generation companies’ shares from KEPCO to the government would require debate over methods of transfer, pricing, and other logistical details, potentially affecting the integration timeline that targets next October for the launch of the new entity. Park’s office has acknowledged that, considering the need for speed, maintaining the KEPCO subsidiary structure may have certain advantages, leaving the door open for discussions with the government.

Currently, four versions of the Korea Power Generation Corporation Act that would integrate the five power generators into one entity have been submitted to the National Assembly. Three of these, excluding Park’s bill, were proposed before the government’s official integration announcement. The bills generally state that the new corporation will inherit the assets, rights, obligations, employees, and businesses of the existing five power generation companies, with the main goals being an industrial transition away from coal and a greater focus on renewable energy. The key differences lie in details such as governance structure and company location. The proposal from Assemblywoman Chung Hye-kyung of the Progressive Party presents a fully public ownership model, with the government contributing 100% of the capital, and ensures board representation for labor unions, civil society, and local communities. Assemblyman Ahn Ho-young of the Democratic Party’s proposal sets a capital requirement of 32 trillion won, with the government to contribute at least 51% of the capital, and specifies the headquarters and renewable energy transition division should be located in North Jeolla Special Self-Governing Province. Assemblyman Kang Min-guk of the People Power Party also calls for the government to contribute 51% of the capital, with the headquarters located in Jinju Innovation City.

Discussion on the Korea Power Generation Corporation Act is expected to ramp up after the National Assembly audit in October. While the ruling party anticipates that the government may introduce a separate proposal around the time of the audit, the government remains cautious. A government official stated, "No decision has yet been made regarding whether the government will submit its own bill for the Korea Power Generation Corporation Act," adding, "Regardless of whether we submit a government proposal, we will actively participate in the Assembly’s legislative process to ensure the best possible legislation."

This content was produced with the assistance of AI translation services.