The Enforcement Decree of the Electric Utility Act has been recently amended (the “Amendment” which took effect as of March 21, 2023) pursuant to which power plants and electricity distributors can refuse to supply electricity to a person/entity that intends to use electricity in the capacity of 5,000 kW or more if it is anticipated that it would be difficult for electricity distributors to sustain the standards for maintaining the quality of electricity and the standards for maintaining the reliability of the electric power system as a result of supplying electricity to such person/entity.
The Amendment has been implemented as part of the government plan to decentralize the concentration of data centers within the Seoul Metropolitan Area. Such plan was initially announced by the Ministry of Trade, Industry and Energy in January 2023 and deliberated during the Ministerial Meeting on Pending State Affairs held on March 9, 2023 which was led by the Prime Minister and participated by 15 Ministries. The Amendment aims to improve and strengthen the legal assessment system related to data centers that consume large amounts of electricity.
In particular, prior to the enactment of the Amendment, Article 14 of the Electric Utility Act provided that power plants, electricity distributors, electric vehicle charging business entities or renewable energy electricity supply business entities in principle shall not refuse to supply electricity while Article 5-5 of the Enforcement Decree of the Electricity Act provided a list of exceptional grounds based on which a supply of electricity may be refused. The Amendment added the following as an additional ground based on which a supply of electricity may be refused: “When it is difficult for electricity distributors to sustain the standards for maintaining the quality of electricity and the standards for maintaining the reliability of electric power system as a result of supplying of electricity to a person/entity that intends to use electricity in large amounts in excess of 5,000 kW (or 2,000 kW for general business facilities set forth under Subparagraph 14 (b) of Attached Table 1 of the Enforcement Decree of the Building Act)” (Article 5-5, Subparagraph 5-2 of the Enforcement Decree of the Electric Utility Act). The added provision above will prospectively apply to electricity use requests made on or after the Amendment takes effect (i.e., on or after March 21, 2023) (Article 2 of Addendum).
Accordingly, given the fact that a legal ground based on which Korea Electric Power Corporation (“KEPCO”) may reject an application for electricity supply filed by a large-volume electricity user as a result of the congestion in electric power system (e.g., a lack of transformers capacities and etc.) has been established, it appears that there is a possibility KEPCO may actually use such ground as a reason to reject applications. That said, from a practical perspective, the Amendment may not have any material impact on the parties that are considering the development and operation of data centers in Korea compared to the past since (i) the Amendment does not change the criteria for evaluating impact on the electric power system and (ii) there were already cases where electricity supply in the Seoul Metropolitan Area was postponed by KEPCO for a considerable period of time due to the congestion in the electric power system. Thus, it would be advisable to closely monitor the implementation and application of the Amendment going forward.
The government is also reviewing and promoting policies that may help mitigate the concentration of data centers in the Seoul Metropolitan Area including, but not limited to, an enactment of the Special Act on the Promotion of Dispersed Energy for the purpose of adopting an electric power impact assessment system. Considering the foregoing, it would be advisable for parties seeking to undertake businesses that require usage of a large amount of electricity (e.g., data centers) to continuously monitor the government policies and trends.
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