Alternative Structure of Distribution Sector for Neutral Distribution System Operation in Korea

Abstract

As some of existing distribution company (DISCO) struggles to perform the function of the future distribution business, discussion from a structural point of view is also necessary. The structure of DISCO affects the characteristics including its incentive to invest in network, effectives in incentive regulation, neutrality in operation and connection of third-party generators, etc. Thus, it is necessary to evaluate the characteristics of each structure of DISCO. There have been studies evaluating electric utility structures. However, since future distribution business is not considered in the previous studies, this study presents six evaluation indexes to compare the structures of DISCO. Four structures of DISCO (vertically integrated utility, legally unbundled, ownership unbundled, independent distribution system operator) are evaluated based on the proposed indexes. It is found that each structure has pros and cons in terms of each index. The analysis in this study can help a policy maker to select a reasonable structure of DISCOs that meets policy objectives.