KEPCO’s financial strain could trigger industry crisis: ex-chief

[Photo by Park Hyung-ki]

The ongoing financial struggles at Korea Electric Power Corp. (KEPCO) could put the entire Korean power industry in crisis unless improvements are made, its former chief warned.

In a recent interview with Maeil Business Newspaper, former KEPCO president and current chairman of wind power company Unison Co. Cho Hwan-ik said that KEPCO’s current crisis stems from a failure to raise residential electricity rates at the right time. He emphasized that the government must explain the urgent need for a hike in residential electricity rates “in an honest manner” to the public.

The state power company purchases electricity from power generation companies and supplies it across the nation and has frozen residential electricity rates for over a year since May of 2023. While rates for large corporations have been raised above cost, residential rates remain below production costs due to inflation concerns, leading to significant debt. KEPCO‘s debt amounted to 200 trillion won ($144.7 billion) as of the end of the first quarter of 2024, and it spent 4.5 trillion won for interest expenses in 2023 alone.

Cho emphasized that, apart from rate hikes, KEPCO needs to find new revenue streams on its own. “There are ways to generate revenue. Investing in promising energy startups and profiting when they are listed could be one of them,” he suggested, adding that “KEPCO should actively engage in creating power solutions using artificial intelligence (AI), overseas nuclear power projects, and large-scale renewable energy projects to generate profits.”

Some argue that KEPCO should be privatized due to its inability to solve problems independently. Cho, however, is cautious about the idea. ”Privatizing KEPCO would undermine the public nature of utilities. Private entities should not become major shareholders,“ he argued, although he conceded that it is “necessary to reflect private sector voices in the business to enhance management efficiency.”

Cho also pointed out the need to pay attention to the paradigm shift in the Korean power industry, which has been dependent on KEPCO orders. Companies producing transformers, cables, and other products have recently expanded their revenue and profit bases by exploring overseas markets. “It is time to create a foundation for trading electricity with foreign countries,” he said.

In Europe, where power grids are connected, it is common to sell surplus electricity to neighboring countries. Cho suggested the possibility of selling electricity produced from renewable energy resources concentrated in the southern regions of Korea to Japan via undersea cables. ”If it is difficult to send electricity to the metropolitan area due to power grid expansion issues, sending it to Japan could be a solution,” he said.