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THE KOREA POWER EXCHANGE and ELECTRICITY MARKET Contents THE KOREA POWER EXCHANGE AND ELECTRICITY MARKET Contents 03 A MESSAGE FROM CEO 04 THE KOREA POWER EXCHANGE(KPX) 08 THE KOREA ELECTRICITY MARKET 12 OPERATING THE MARKET and THE POWER SYSTEM 24 WHOLESALE ELECTRICITY MARKET DESIGN 28 ESTABLISHMENT OF STABLE POWER SUPPLY 30 APPENDIX - Brief History of the Electricity Industry in Korea - Restructuring of the Power Sector in Korea - Phased Restructuring a message from CEO The winds of change are blowing all over the world and as a result, all industry is being affected. EXCHANGE Under the globalized economic system, countries all over the world are waging silent war in every area of industry. Needless to say, Korea’s electricity industry can only succeed by rising to meet these changes and improving competitiveness through self- reform. We are now experiencing an unprecedented transformation, namely the restructuring of KOREA POWER the power industry. This change in the power industry is designed to promote efficiency 3 through the introduction of a competitive system and improve customer convenience by providing customers with a choice in their selection of economical and stabilized electricity. Such a change is simply a sign of the times. The Korea Power Exchange(KPX) continues to perform its numerous responsibilities in the domestic electricity market created through the restructuring of the power industry. These include the operation of the electricity market, design of the future electricity market, operation of the power system, and support of the establishment of the government’s basic plan for the demand and supply of electric power. Along with this, all executives and staff members continue to exert every possible effort to see that the benefits stemming from competition are turned over to consumers by opening the wholesale competitive electric power market at just the right future time and preparing steps to ensure that electric power be traded in the market in the same manner as general commodities. We hope that the public will extend their full understanding and encouragement to our company for the creation of a successful electricity market. Kim Young-joon, Chairman & CEO THE KOREA POWER EXCHANGE(KPX) Establishment of the KPX ollowing the government-driven restructuring subsidiaries from the KEPCO, the electricity supply Fplan and under the Electricity Business Act of sector in Korea has been reorganized to include the Korea, the KPX, as of April 2, 2001, was established as KEPCO (transmission and distribution, monopoly a core organization responsible for management of wholesale purchaser and retail supplier), and the the newly introduced competitive electricity market. six(6) newly established GenCos and existing IPPs. Furthermore, with the separation of six(6) generation Legal Position he KPX was established in accordance with T Article 35 of the Electricity Business Act in Korea as a non-profit independent organization. Membership and Obligation Governance he KPX is comprised of two(2) types of he governance of the KPX consists of the T members, regular members and associate T Members General Meeting, the Board of members. The regular members consist of the KEPCO Directors where representatives from public (transmission, distribution and supply), six(6) newly organizations are also entitled to attend, and one(1) established generation companies and IPPs Independent Auditor. The Board of Directors is (Independent Power Producers). Regular members comprised of three(3) KPX directors, one(1) have the right to participate in the decision-making government director, three(3) representatives from the processes of the KPX and are obliged not only to KPX regular members, and three(3) representatives observe the market rules but also to bear the KPX from non-profit public benefit organizations. operating costs. Among the regular members, either The KPX operates on a break-even basis. The costs the generation companies with registered installed incurred to run the organization are recovered from capacity over 2000 MW or supplier companies with the members’registration fees, annual fees taking annual electricity sales over 10 TWh are classified into EXCHANGE into account the relative size of each member’s Investment Regular members and are obliged to generation capacity, and electricity transaction fees invest in the establishment of the KPX. The associate depending on the volume of electricity traded in the members consist of transmission and distribution market and a predetermined transaction rate.1 The companies, utilities that own power plants under Electricity Business Act of Korea defines the structure construction and parties working with the KPX. KOREA POWER of fees payable to the KPX. Associate members can voice their opinions during 5 general meetings. Registered Members 1. The electricity transaction rate was set at 0.086 Won/kWh and approved by the Board of Directors. THE KOREA POWER EXCHANGE(KPX) KPX Objective and Functions he objective of the KPX is to manage the market �Measurement of the amount of electricity T in a reasonable and transparent manner so that transacted. power producers and suppliers can participate in the �Enactment and amendment of the various rules market with equal rights. including regulations for the operation of the Electricity Market. � The Functions of the KPX are as follows.: �Operation of the national power system. �Establishment and operation of a Competitive �Measurement of electricity quality. Electricity Market. �Invoicing, settlement and payment of electricity transaction charges and expenses for electricity transactions. Organization Chart Audit & Chairman & C.E.O Inspection Office Central Load Dispatch Center Jeju Load Dispatch Center Planning & Market & System Education Center Administration Division Operation Division General Power Market Market Information System Management Planning Operation Development Technology Operation & Dept. Dept. Dept. Dept. Dept. Control Dept. System Operation General Affairs Power Planning Settlement Planning & IT Planning & Team Team Team Coordination Team Team Scheduling Team System Human Resources Power Technology Market Market & Implementation MOS Team Engineering Development Team Development Team Operation Team Team Team Strategy Design Demand Market Power Production Development Management EMS Team Forecasting Team Monitoring Team Scheduling Team Team Team Planning & Power System Power Statistis Market Training CBP System Power Grid Budget Team Planning Team Team Team Team Protection Team Database Dispatcher International Operation Criteria Finance Team Management Training Cooperation Team Team Team Team KPX Homepage he KPX is legally obliged to release market Members, when logging in, Tinformation to market participants in accordance can access the following information: with Article 14 of the Electricity Business Act and Article 73 of the Electricity Market Rules. �Daily, weekly, monthly and long term demand arket information including the volume and forecasts Mcost of electricity transactions, as well as �Hourly System Marginal Price, Base Load forecasts on demand for electricity, is released Marginal Price through the KPX home page (www.kpx. �Available capacity of the day as declared by the or.kr/english). The Information Disclosure Manual generators details the methods and scope of information the �Metering and settlement results of the generators KPX is required to release. �Market and power system operation daily status report EXCHANGE KOREA POWER 7 THE KOREA ELECTRICITY MARKET Market Rules he KPX operates the electricity market in he Guidelines include procedures for the Taccordance with the Electricity Market Rules, TMarket Operation Committee, Arbitration, and Guidelines, Market Operation Procedures, and Rule Amendment Committee. Market Operation System Operation Procedures approved by the Procedures encompass Demand Forecast, Offers and KOREC(the Korea Electricity Commission)2 and the Bids, Price Setting Schedules, Metering, Settlements, government. Information Release, etc. System Operation Procedures cover Operation Schedules, Real Time n accordance with Article 43 of the Electricity System Operations, Emergency Dispatch, Power IBusiness Act, Electricity the Market Rules detail System Protection, EMS Operations, Ancillary electricity market regulations for establishing the services, etc. All of this information is available for power trade under competition, and set forth the market participants on the KPX website. items necessary for its effective and stable operation through the adoption of competition in the electricity industry. Pool Types and Pricing Methods Pricing under the Cost Based Pool System he pricing methods of competitive power Tmarkets vary depending on the type of power nder the Cost Based Pool, generators are pool. In the Cost Based Pool(CBP) now being Uobliged to provide details of their production applied in Korea, the market price is determined costs, which are independently checked and based on the system marginal cost. In the Two approved. This information is then used by the Way Bidding Pool(TWBP), the market price will be KPX to determine the lowest rate schedules for determined by the bidding prices from generation both setting market prices and dispatching the companies, suppliers and wholesale consumers. power system. he electricity market price is determined by Tthe KPX as either the sum of the System Marginal Price(SMP) or the Base Load Marginal Price(BLMP) plus the predetermined Capacity Payment (CP). 2. Regulator EXCHANGE � The BLMP and SMP
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