An analysis has found that if the government's planned regionally differentiated industrial electricity pricing system is implemented, the annual power sales revenue of 17 private power generation companies in non-metropolitan areas could decline by about 660 billion won. Critics point out that because the funding needed to lower electricity rates for regional industrial customers is to be raised by cutting wholesale power prices paid to generators, the burden could be concentrated on private operators.

[LMP introduction would cut wholesale prices by 10.6 won... average 39 billion won loss per company]

According to an analysis released on the 26th by the office of Representative Park Su-min of the People Power Party, based on the Korea Power Exchange's Electric Power Statistics Information System (EPSIS), if the introduction of the Locational Marginal Pricing (LMP) system lowers wholesale power prices in non-metropolitan areas by 10.6 won per kilowatt-hour, the combined annual revenue loss for 17 major private power generators is estimated at 660.5 billion won. That amounts to an average burden of about 39 billion won per company.

The government is pursuing a plan to apply differential electricity rates by region in order to disperse industrial power demand concentrated in the metropolitan area to regional areas. At a public hearing on regional industrial electricity pricing held in August, Korea Electric Power Corporation (KEPCO) proposed dividing the country into four zones—southern and northern metropolitan, central, and southern—and expanding industrial electricity rate discounts for areas farther from the capital region. The plan is to supply electricity to non-metropolitan industrial customers at rates up to 10% lower.

KEPCO expects about 2.8 trillion won annually to be needed for the regional rate discounts. It plans to secure the funding by lowering the wholesale prices applied when purchasing power from non-metropolitan generators. The lawmaker's office analyzed that the introduction of regionally differentiated electricity rates would reduce the annual power sales revenue of all non-metropolitan generators by about 1 trillion won, with roughly two-thirds of that burden falling on major private power generators.

[Public and private generators face different burden structures... concerns over PF-based financial health for private firms]

There is also a difference in the burden structure between public and private power generators. Public generators such as Korea South-East Power, Korea Southern Power, Korea East-West Power, Korea Western Power, and Korea Mid-West Power are subsidiaries consolidated into KEPCO's financial statements. Even if a generator subsidiary's power sales revenue falls, the parent company KEPCO's power purchase costs decrease correspondingly, so the impact is offset in consolidated accounting. A post-hoc compensation mechanism through the settlement adjustment coefficient also applies.

In contrast, for private power generators, a drop in wholesale prices directly translates into lower sales. In particular, since a considerable number of power generation projects have been pursued on the basis of private capital and project financing (PF), concerns have been raised that revenue declines could affect their financial soundness.

Many of the private generators included in the analysis are new operators that began commercial operation between 2024 and 2026. Industry sources explain that, being in the early stages of their businesses, they do not have sufficient financial reserves to cope with revenue declines.

["Notification of system change after investment decisions... possible violation of the principle of protecting investor trust"]

The gap between the timing of investments and the introduction of the new system has also emerged as a contentious issue. Some private generators reportedly decided to invest in power facilities in non-metropolitan areas in line with government policy, and were informed of the plan to introduce regionally differentiated wholesale pricing only after completing business licensing and construction. Because of this, some argue that applying a changed price system to operators who have already committed their investments may violate the principle of protecting investor trust.

Representative Park Su-min criticized the plan, saying, "While I sympathize with the intent of lowering industrial electricity rates in regional areas, shifting the cost of funding onto private power generators who have already completed their investments—rather than onto the government and KEPCO, which failed to build the transmission grid in time—puts the cart before the horse." He added, "Before implementing the system, the government must transparently disclose the burden structure by power source and by operator, and first prepare transitional measures for existing operators."