[비즈한국] The five-company division system that has been maintained for 25 years since the restructuring of the power industry in 2001 is coming to an end, as they are being merged back into a single, massive state-owned power generation corporation. The goal is to eliminate the inefficiencies of a fragmented public enterprise structure and forcefully drive a state-led energy transition. "Expectations" of strengthening public energy interests through the integration of state-owned power generators are clashing sharply with "concerns" over the emergence of a giant monopoly and market distortions.
On September 4, the Ministry of Climate, Energy, and Environment held a "Meeting on the Integration Plan for State-Owned Power Generation Companies" at the KEPCO Nam-Seoul Headquarters and officially announced plans to integrate the five power generation companies—Korea South-East Power, Korea Midland Power, Korea Western Power, Korea Southern Power, and Korea East-West Power—into a single entity. The plan involves creating a new 100% subsidiary of KEPCO, tentatively named "Korea Power Generation Co., Ltd."
Internal governance will undergo a major downsizing and shift toward an energy transition focus. The existing structure of "five CEOs, five auditors, and ten standing directors" across the five companies will be drastically compressed into a "one CEO, one auditor, and four standing directors" system. Administrative personnel currently dispersed across the five headquarters will be reduced from approximately 2,400 to around 1,800. The 600 reduced staff will be redeployed to three or four newly established "Regional Renewable Energy Headquarters," tasked exclusively with expanding local renewable energy such as solar and onshore wind power. The head office will be organized into four divisions: Renewable Energy, Just Transition, Safety Technology, and Planning & Management.
Once the integration is complete, the combined generation capacity will reach approximately 53GW, making it a global giant—the 8th largest power generator in the world excluding China (14th including China). The government has presented a specific timeline to enact a special law within the current regular session of the National Assembly this year to provide grounds for regulatory exemptions, succession of rights/obligations and employment contracts of existing companies, simplification of merger procedures, and exemption from business combination reviews. It plans to launch the "State-Owned Power Generation Integration Preparatory Committee," chaired by a vice minister, in September, aiming to finalize the official launch by October 1, 2027.
Supporters: "Restoration of Public Energy Interests and Employment Succession via a Single Entity"
Proponents of the integration emphasize the restoration of state-led energy transition and the resolution of structural inefficiencies of the current split system as the core justification.
First, critics argue that the neoliberal division in 2001 only led to meaningless, excessive competition and redundant costs among the five companies, while over 90% of domestic renewable energy investment has been taken over by private capital, deepening a "covert privatization." They believe that only when the public sector directly takes responsibility for large-scale renewable energy expansion can the public nature of electricity and energy sovereignty be restored.
Hwang In-cheol, Climate and Energy Team Leader at Green Korea United, stated, "It is not desirable to leave energy, an essential good for citizens' lives, to private businesses focused solely on profit." He added, "Since private businesses can cancel projects at any time if they are not profitable, an integrated state-owned power generator must increase investment to lead the expansion of offshore wind and other projects."
Another major argument is that merging dispersed research and development (R&D) and investment resources, along with joint fuel purchasing and the unification of maintenance materials, can reduce costs and lessen the factors contributing to electricity rate hikes for future generations. Je Yong-soon, chairman of the power industry union, who attended the symposium on "Desirable Power Industry Structure for the AI Era" held at the National Assembly on August 7, emphasized, "The government's shift toward discussing integration for problems that haven't been solved for 25 years aligns with the long-standing demands of the power industry labor sector." He added, "Since the 2001 division, each power generation company purchasing LNG independently has had the counterproductive effect of weakening the purchasing power of KOGAS."
There is also talk that a "just transition" following the phase-out of coal power is only realistically possible under a single corporate entity. As coal-fired power plants are sequentially shut down, a single public corporation would be better able to seamlessly transfer and relocate thermal power workers to public renewable energy positions.
Rep. Kim Ju-young of the Democratic Party of Korea, who hosted the National Assembly symposium, emphasized, "The employment crisis for thermal power workers is becoming visible due to the push for a total phase-out of coal power. Designing it to absorb their employment and risks within the framework of an integrated state-owned power generator, rather than creating separate renewable energy subsidiaries, is a 'just transition guaranteed by structure'."
Critics: "Market Signal Paralysis, Violation of Grid Neutrality, and the Trap of Path Dependency"
Conversely, some warn of market distortions and damage to the fairness of the power grid following the emergence of a giant monopoly.
In a congratulatory speech at the "How to Reorganize State-Owned Power Generators in the Energy Transition Period" forum hosted by the National Assembly Climate Crisis and Decarbonized Economy Forum and Solutions for Our Climate on September 1, Rep. Park Ji-hye of the Democratic Party of Korea said, "While the inefficiency caused by the split is a problem that must be solved, integration should not lead to the emergence of a giant monopoly that violates grid neutrality and hinders the creation of a fair electricity market." She added, "There is a concern that if one company simultaneously carries out the conflicting missions of 'managing coal-exit assets' and 'expanding renewable energy,' the momentum for energy transition could weaken."
The biggest issue is market distortion due to the emergence of a monopoly that accounts for over 60% of wholesale power supply. There is a risk that the dominant operator could artificially manipulate wholesale electricity prices (SMP) by adjusting supply capacity or distorting power generation cost data.
Lee Yu-soo, a professor at Soongsil University who presented at the forum, pointed out, "If a giant public enterprise with a 60% market share is born, the roadmap for market advancement, such as the Korea Power Exchange's price bidding system or real-time market, will be neutralized, and market price signals will be completely lost. Such a structure is destined to degenerate into a 'managed market' that is only a market in name."
Added to this is a warning about the violation of "grid neutrality." Grid neutrality is the fundamental principle that transmission and distribution networks, which remain a natural monopoly to prevent redundant investment, must be available to all power generation operators fairly and equally without discrimination. However, concerns are emerging that if KEPCO, which monopolizes the transmission and distribution network, combines with a massive integrated power generation company, it could hinder the expansion of renewable energy through delayed grid connection for private renewable energy operators, unfair shifting of output curtailment, and checks on direct Power Purchase Agreements (PPA).
Professor Lee Yu-soo criticized, "As long as the state-owned power generators remain subsidiaries of KEPCO, it is difficult to rule out the formation of a public cartel. In a situation where the grid is saturated, there is a high risk that priority access and power dispatch will be given to integrated public generator units, while grid discrimination and uncompensated output curtailment will be shifted to private renewables or Energy Storage Systems (ESS)."
In response, Kang Kyung-taek, head of the Power Industry Policy Division at the Ministry of Climate, countered at the forum, "The issue of grid neutrality is a matter stemming from the vertical structure where KEPCO handles both transmission/distribution and power sales, rather than whether there is one or five power generation companies; it is distinct from the integration of power generation companies." Some suggest that if grid neutrality is the problem, an alternative would be to have the relationship between KEPCO, which operates the transmission/distribution grid, and the power generation companies be that of independent legal entities rather than subsidiaries.
There is also criticism that the speed of energy transition might actually slow down. In a structure where over 95% of the power generation companies' facilities are traditional fossil fuels and nuclear power, and renewable energy is only at the 0.3% level, analysts suggest that if a massive single organization is launched, "path dependency"—the tendency to defend the losses of existing fossil fuel assets—could strengthen, thereby reducing the momentum for a coal-exit transition.
Kim Se-won, a researcher at the Power Market & Grid Team of Solutions for Our Climate, pointed out, "If the power generation subsidiaries had a genuine will for energy transition, they could have increased renewable energy over the past 25 years. If they are merged into a single organization, it will be difficult to find the realistic momentum to actively pursue renewable energy expansion, which would require them to undermine their existing core businesses." He added, "It would be much more natural and logical from a just transition perspective to separate them into a coal power reduction entity and a public entity dedicated to renewable energy, then gradually relocate and transition the personnel reduced from thermal power cuts to the continuously expanding renewable energy entity."
On the other hand, Team Leader Hwang In-cheol countered, "If a company is composed only of assets that must be phased out, we should ask the reverse question: how will this company behave? Since the company will disappear once it transitions away from fossil fuels, it is even more difficult to make a choice that shuts down the company itself, so it is actually more likely to strengthen path dependency and resist the transition."
Furthermore, criticisms have been raised that since the combined debt ratio of the five companies is around 160% and costs for closing coal plants are being added, the idea that large-scale fundraising capacity will be created solely through integration is a "financial illusion" that could only deepen bureaucratic inefficiency.
Demands for Democratic Control and Independent Regulatory Agencies for Power Public Enterprises
While opinions on the integration are divided, a consensus has emerged that democratic control and institutional safeguards for giant power public enterprises must be established.
First, there is a strong call for "democratic control" over large power public enterprises. The demand is that transparency must be secured from project planning to evaluation to prevent the integrated public enterprise from pushing through the construction of power grids or power plants unilaterally and undemocratically as in the past.
Lee Tae-sung, head of the Power Irregular Workers Solidarity Branch of the Korean Public Service and Transport Workers' Union, emphasized, "If the integration and employment measures end with the integration of the prime contractor public enterprises, it is meaningless for the 9,000 or so subcontract and subsidiary workers." He added, "A democratic control body where residents and workers participate in decision-making must be designed within the integrated legal entity to prevent the giant public enterprise from crushing regionally decentralized energy or arbitrarily extending the lifespan of fossil fuels."
The establishment of an independent power regulatory agency has also been proposed. The argument is that a "Power Supervisory Agency," independent from the government or power authorities, should be newly established. It is suggested that this body should establish fair rules for grid usage and monitor the abuse of market dominance.
Researcher Kim Se-won stated, "The current Electricity Regulatory Commission is under the Ministry of Climate and thus does not perform a practical regulatory function. Like the Financial Supervisory Service or Financial Services Commission in the financial market, or the Fair Trade Commission in the general market, an independent regulatory agency is needed to strengthen market monitoring and grid oversight functions."
However, there are also significant voices of caution regarding the nature of such an independent regulatory agency. Professor Jung Se-eun of Chungnam National University, who attended as a panelist at the symposium, raised issues from a different angle by citing the case of the UK's independent regulatory agency, Ofgem. Professor Jung argued, "Regulatory bodies that emerged after market opening, like Ofgem in the UK, can be easily captured by market fundamentalists, potentially strangling KEPCO, a public enterprise, and harming public interests. Rather than rushing for institutional independence, the priority should be the principle of the state guaranteeing costs and managing rates publicly so that KEPCO's deficit can be resolved."