The power industry in Korea: The business environment for the participation of the private sector

Abstract

The Korean government has allowed the introduction of independent power producers (IPPs). Private firms were invited to build and operate two 500 MW bituminous coal plants and two 400 MW LNG plants. Although the stated rationale for introducing IPPs is raising efficiency through competition, the real forces that drive such a policy are the necessity to secure enough funds from the private sector to raise the generating capacity of the country and the need to resolve siting issues. The participating firms have to carefully review various legal factors such as laws governing the electrical power business, antitrust regulations which include the Monopoly Regulation and Fair Trade Act and credit control by the central bank, and tax laws. For the successful adoption of IPPs appropriate institutional changes should also be made. In terms of regulatory issues, alternative methods of rate regulation need to be considered. In addition, the changing business environment requires careful analysis and modification of the current regulatory framework to keep pace with the rapid transition in industry size and structure.