Same price, different paycheck — capacity payments and the settlement adjustment factor

A fire station stays open on days when nothing is burning. The fire trucks sit in the garage, and the crew cleans the gear. Even if there is not a single call-out that day, salaries still get paid. Nobody finds that odd. No one knows when a fire will start, and if there is no truck at that moment, help comes too late. The power market has this kind of money too.

Write what a power plant is paid on one bank statement, and it has three lines: the value of the electricity it made, the value of the capacity it keeps ready, and, for some plants only, an adjustment that shrinks part of the first line. Split the three lines apart, and you can see which line each story is about — "power plants get paid for sitting idle," or "settlement adjustment factor cut."

What lines show up on a plant's statement?

The first line is the value of the electricity actually made. A plant is paid for the amount it made, based on the wholesale price set for each hour, the SMPSMP (System Marginal Price) SMP is the energy price set for each trading hour in the power market. It is the highest generation price among the generators eligible to set the price in that hour. Glossary →. The second line is the value of the capacity kept ready to deliver power at any time. This is the capacity paymentCapacity Payment (CP) A capacity payment is paid for the available capacity a generator bids, apart from its output. It covers fixed costs, such as construction, that SMP alone can hardly recover. Glossary → (CP).¹Source 1Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)See in sources →1 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation) The first line puts a price on "how much did you make," the second on "how much did you keep ready."

The third line does not appear for every plant. Some generators are paid less on the part of their first-line money above fuel cost, cut by a factor. These include the generators of companies in which KEPCO (Korea Electric Power Corporation) holds more than half the shares — often called "KEPCO's generating subsidiaries" — and the centrally dispatched coal generators of other companies. This factor is the settlement adjustment factorSettlement Adjustment Factor It adjusts the settlements of generators at KEPCO majority-owned companies and of central-dispatch coal units. The rules place it among measures for power price stability. Glossary →. So even when plants sell electricity in the same hour at the same price, the amount on each statement can differ.

Why is the capacity payment paid separately?

The capacity payment is not based on the hours a plant actually ran. It is based on the capacity the generating company offered in its bid as "we can deliver this much" — its available capacity. So a centrally dispatched generatorCentrally dispatched generator A centrally dispatched generator is a unit over 20 MW that runs on KPX dispatch instructions; others are non-centrally dispatched. Glossary → (one whose running time and output the Korea Power Exchange, KPX, directly instructs) that offers available capacity to the market is paid on the same basis whether it ran all day or only stood by. It is not money paid only to idle generators. Most small generators, though, such as small solar plants, do not receive it^*1More precisely *1This piece could not confirm exactly where that line is drawn.*1 This piece could not confirm exactly where that line is drawn..¹Source 1Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)See in sources →1 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)

The reason is that electricity is hard to store. So enough plant must always be kept on hand that there is no shortage even in the single busiest hour, the peak demandPeak Demand Peak demand is the highest level of electricity demand during a given period. KPX's rules call it 'peak load' and measure it as the largest of the hourly average values. Glossary →. At the end of 2025, plants taking part in the power market added up to 146,157 MW, about 146 GW (MW and GW measure how much power can be delivered at one moment; a GW is a thousand MW).²Source 2Korea Power Exchange (KPX), *2025 Electricity Market Statistics* (「2025 전력시장통계」), overview of annual electricity market statistics (printed p. 29)See in sources →2 Korea Power Exchange (KPX), *2025 Electricity Market Statistics* (「2025 전력시장통계」), overview of annual electricity market statistics (printed p. 29) The most electricity the whole country has ever used in a single hour was 97.1 GW, on August 20, 2024.⁶Source 6Ministry of Climate, Energy and Environment, *All-out effort for stable power supply despite forecast of record summer peak demand* (「올여름 역대 최대전력수요 전망에도 안정적인 전력수급에 총력」, press release, 2026-06-25; unofficial translation), attachment p. 4all-time No. 1, 2024-08-20, 97.1 GW. Copy posted by the KDI Economic Information and Education Center. "About 1.5 times" is a rough figure from 146,157 MW ÷ 97,100 MW ≈ 1.51.See in sources →6 Ministry of Climate, Energy and Environment, *All-out effort for stable power supply despite forecast of record summer peak demand* (「올여름 역대 최대전력수요 전망에도 안정적인 전력수급에 총력」, press release, 2026-06-25; unofficial translation), attachment p. 4 — all-time No. 1, 2024-08-20, 97.1 GW. Copy posted by the KDI Economic Information and Education Center. "About 1.5 times" is a rough figure from 146,157 MW ÷ 97,100 MW ≈ 1.51. The total capacity of these plants is about 1.5 times the busiest hour so far.

But this 1.5 times is not all spare room. The two numbers are not even measured at the same point. The plant figure is a year-end total; the peak demand figure is an all-time record. The total also includes power that cannot be delivered at that moment — generators that are broken or under maintenance, or solar panels in the evening after sunset.

Some of these generators run only a few hours a year^*2More precisely *2This piece could not confirm how many.*2 This piece could not confirm how many.. They wait for the busiest evenings and the hottest summer days. Such generators, it is often explained, find it hard to recover the cost of building and keeping them from electricity sales alone. Yet if they close, power could run short at the busiest moment. The capacity payment is money that keeps such plants in the market.

Take a household that uses 300 kWh (kilowatt-hours, the amount of electricity used) a month — about 10 kWh a day. On most days its use bunches up a little in the evening and falls off at night. But on a scorching midsummer evening, this home and millions of its neighbors switch on the air conditioning all at once. The generators that carry those few hours have to wait all year, and their cost, too, ends up in the electricity bill.

How is the capacity price set?

The starting point is the reference capacity price — the base rate put on capacity kept ready. The Cost Evaluation Committee, which reviews generation costs, sets it, and KPX publishes it every year before July. The price applies from July of that year to June of the next.

The price actually paid is set by multiplying this by several factors (multipliers). The factors vary with regional supply conditions, the time of day, and the generator's performance^*3More precisely *3This piece could not confirm what the performance factor measures.*3 This piece could not confirm what the performance factor measures.. For a fire station, it is like having the same base budget but getting a different allocation depending on the area it covers and the hours it works. So even the same generator is paid differently depending on when and where.¹Source 1Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)See in sources →1 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)

Why are two plants selling at the same SMP paid differently?

One evening at 7 p.m., two plants send electricity into the same grid. One is a private LNG plant; the other is a coal plant of one of KEPCO's generating subsidiaries. The meters at both plants pass the same 1 kWh, and that hour has a single SMP. Yet the coal plant is paid less on the part of what it is owed above fuel cost, cut by the settlement adjustment factor.

The usual clue is who buys and who sells. In Korea, KEPCO buys electricity in the market and sells it to consumers. But in 2001, KEPCO's generating side was split into 6 public generating companies, and many of the sellers in the market are these companies, in which KEPCO holds shares. On this common reading, the buyer and the sellers are, in effect, one family.

Picture two shops run by one family. The elder brother runs a shop that may sell to customers only at a price the state sets; the younger brother runs a workshop that supplies that shop. If the shop paid the full market price for the workshop's goods, then on days when market prices jump, the profit would pile up at the workshop, while the shop, tied to its fixed price, would take the loss. So the materials are paid in full, as on the receipt, and only the profit on top is shared. The settlement adjustment factor's sum has a similar shape. This analogy, though, is a common explanation, not a reason the Rules state.

The generators the factor applies to fall into two broad groups. The two-shops analogy is about the first group. For the second group, there is a separate standard for setting the factor so that the plant recovers what it spent (more on this below).

• First group: generators of generating companies in which KEPCO holds more than half the shares (over 50%). Not only nuclear and coal, but domestic-coal generators, which burn coal mined in Korea, and centrally dispatched generators are included too.
• Second group: centrally dispatched coal generators of companies outside the first group.
• Left out: pumped-storage generators and renewable-energy generators are excluded from both groups.³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001

What does the third line cut?

What the factor shrinks is not the whole payment. It shrinks only the part above fuel cost. For electricity actually made, the sum takes three steps. The amount a plant would be paid before any factor is applied is called the settlement payment. Step one: subtract that generator's fuel cost (its variable costVariable Cost Variable cost is the cost that rises and falls with output, such as fuel and variable O&M. Korea's power market uses these variable costs to set the running order and the market price. Glossary →) from the settlement payment. Step two: multiply what remains by the factor. Step three: add the fuel cost back.³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001 The fuel cost is paid back in full, and only the part above fuel cost is paid at the factor's rate.

The factor is less than or equal to 1. At 1, nothing is cut and the plant is paid the market price. The smaller it is, the more of the part above fuel cost is cut.

Plugging in numbers makes the size clear. These are assumed values, there only to show the sum. Say the settlement payment for that 1 kWh at 7 p.m. is 100 won, and the generator's fuel cost is 60 won.

• If the factor is 1 → the plant is paid the 100 won as is.
• If the factor is 0.5 → of the 40 won above fuel cost, only half, 20 won, remains; add back the 60 won fuel cost and the plant is paid 80 won.
• If the factor is at its floor, 0.0001 → the 40 won part becomes 0.004 won, and the plant is paid, in effect, only its 60 won fuel cost.³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001

A factor of one half does not halve the settlement payment. So who sets a value like 0.5 or 0.0001, and by looking at what?

Who sets the factor, and why have it?

If you deal with the factor in practice, start with the documents behind it. The factor sits in the operating rules of the power market (the *Electricity Market Operation Rules*, "the Rules" below). KPX drafts the Rules and the government approves them. The term "settlement adjustment factor" was added to the Rules as a definition on December 26, 2006.⁴Source 4Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.)See in sources →4 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.)

The Rules do not name KEPCO. They only refer to an electricity retailer that cannot set its rates freely and is regulated by the government. That is why the first group is usually called "the generators of KEPCO's generating subsidiaries" for short.

The factor is discussed and set by the committee that examines generator costs (the Cost Evaluation Committee), and changing it requires the approval of the Minister of Climate, Energy and Environment.⁵Source 5Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 21.7 (Approval) para. 1 item 4approval of the Minister of Climate, Energy and Environment when changing the settlement adjustment factorSee in sources →5 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 21.7 (Approval) para. 1 item 4 — approval of the Minister of Climate, Energy and Environment when changing the settlement adjustment factor As a rule it is set once a year. When grounds set out in the detailed regulations under the Rules arise, it can also be revised every three months (each quarter). There are three standards to keep when setting the factor.

• It must not upset the investment order. The factor must not flip "which type of power plant (source) is better to invest in first." Sources run under government policy, such as nuclear and domestic coal, may be exempted from this standard. That does not take them out of the factor's scope; they are in the first group above.
• The second group recovers what it spent. For coal generators outside the first group, the factor is set at a level that lets the plant recover four things: fuel cost; operation and maintenance cost; the money spent on building it (construction investment); and a fair return on the money invested (return on investment). The sum has the same shape as for the first group: the part after fuel cost is multiplied by the factor. What differs is the standard for setting the factor's value.
• A mid-year recalculation stays within range. If a newly calculated factor falls outside a set range, the first group's generators are brought within the range above 0 and up to 1. The lowest value (the floor) is 0.0001^*4More precisely *4This piece could not confirm whether that floor applies at all times or only when the factor is recalculated.*4 This piece could not confirm whether that floor applies at all times or only when the factor is recalculated..³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001

The factor's sum is not used only for electricity actually made. The same sum applies to three more kinds of energy. First, energy produced short of the generation schedule and power produced while test-running a new generator (commissioning). Then energy produced above available capacity under KPX's operating instructions (dispatch instructionsDispatch and Merit Order Dispatch is KPX telling generators when and how much to run. In principle it follows the market's priority order: generators with the lowest variable cost run first. Glossary →). The second line, the capacity payment, is not on this list.³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001

On why the factor exists (its purpose), the Rules offer only two titles directly: an article title and a schedule title. The three standards above are principles for how to set the factor, not its purpose. The article dealing with the factor is titled "Measures for electricity price stability, etc."⁴Source 4Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.)See in sources →4 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.) The schedule holding the formula (a table attached to the end of the Rules, Schedule 23) is titled "Adjustment of settlement payments for electricity price stability, etc."³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001 Both put "price stability"^*5More precisely *5This piece could not confirm whether it means the wholesale price or the retail rate.*5 This piece could not confirm whether it means the wholesale price or the retail rate. first.

The background beyond that is usually explained like this. The SMP is set at the price of the most expensive generator, among those scheduled to run in that hour, that is eligible to set the price. So a generator with cheap fuel keeps a large margin, as big as the gap between the SMP and its own fuel cost. The buyer is KEPCO, whose rates are regulated, and many of the sellers are public generating companies in which KEPCO holds shares. On this account, the settlement adjustment factor is a device for sharing that margin with the retail side so it does not pile up only on the generating side. This explanation, though, is not written in the Rules.

How to read it in the news

The criticism "power plants get paid for sitting idle" comes up from time to time. Going by the name alone, the capacity payment sounds like "consolation money for idle generators." In fact, generators that are running are paid on the same basis. The capacity payment is not the price of idle time; it is the price of a promise to run when needed. Seen this way, the questions worth asking become clearer: how much is it right to pay for that readiness, and for which plants' readiness?

When a headline reads "settlement adjustment factor cut," it means the generators concerned are paid less of the part above fuel cost. It does not mean they are paid less for fuel itself. By the assumed sum above, a factor of 0.5 turns 100 won into 80 won, not 50 won. When reading such stories, check who set the factor (the Cost Evaluation Committee) and whether the government approved it.

There is also a common misunderstanding: the idea that the factor applies to every generator. Bring it into a story about private LNG generators or renewable-energy generators, and you get it wrong.

Back to the two plants

Back to the two plants at 7 p.m. Same 1 kWh, same SMP. The private LNG plant is paid a price based on the SMP, with no factor. The coal plant of KEPCO's generating subsidiary gets its fuel cost back in full and only the part on top at the factor's rate. On the first line (setting the capacity payment aside), for the same 1 kWh sold, the difference between the two plants arises only in the part above fuel cost.

The third line does not show on the electricity bill. When the factor falls, the price KEPCO pays for power drops; when it rises, the price goes up. That difference passes through KEPCO's profit and loss and, in the long run, may become part of the picture when rates are set^*6More precisely *6This piece did not trace how that link works.*6 This piece did not trace how that link works.. It is not a line printed straight on the bill, but a handle that changes the path the money takes behind the bill.

Words in this piece

• capacity paymentCapacity Payment (CP) A capacity payment is paid for the available capacity a generator bids, apart from its output. It covers fixed costs, such as construction, that SMP alone can hardly recover. Glossary → — money paid not for the amount of electricity made but for capacity kept ready to deliver at any time.
• settlement adjustment factorSettlement Adjustment Factor It adjusts the settlements of generators at KEPCO majority-owned companies and of central-dispatch coal units. The rules place it among measures for power price stability. Glossary → — a factor that shrinks the part above fuel cost in what is paid to the generators of companies in which KEPCO holds more than half the shares and to the centrally dispatched coal generators of other companies.
• SMPSMP (System Marginal Price) SMP is the energy price set for each trading hour in the power market. It is the highest generation price among the generators eligible to set the price in that hour. Glossary → — the wholesale price of electricity, set for each hour. The value of electricity made is paid on this basis.
• centrally dispatched generatorCentrally dispatched generator A centrally dispatched generator is a unit over 20 MW that runs on KPX dispatch instructions; others are non-centrally dispatched. Glossary → — a generator whose running time and output KPX directly instructs.
• peak demandPeak Demand Peak demand is the highest level of electricity demand during a given period. KPX's rules call it 'peak load' and measure it as the largest of the hourly average values. Glossary → — the demand in the single hour of highest electricity use within a set period (a year, or all time so far). The 97.1 GW in this piece is the all-time record. Plant is kept on hand with this hour as the yardstick.
• variable costVariable Cost Variable cost is the cost that rises and falls with output, such as fuel and variable O&M. Korea's power market uses these variable costs to set the running order and the market price. Glossary → — costs incurred each time electricity is made, such as fuel. The factor leaves this part alone.
• dispatch instructionsDispatch and Merit Order Dispatch is KPX telling generators when and how much to run. In principle it follows the market's priority order: generators with the lowest variable cost run first. Glossary → — operating instructions KPX gives to generators.

¹Source 1Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation)See in sources →1 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity)· item 5 (capacity price)· Art. 2.1.1.9 (Determination of the reference capacity price)· Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation): Korea Power Exchange (KPX), ^*7More precisely *7Electricity Market Operation Rules**7 Electricity Market Operation Rules*(https://www.kpx.or.kr/board.es?mid=a10205010000&bid=0030) (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 2 (available capacity) · item 5 (capacity price) · Art. 2.1.1.9 (Determination of the reference capacity price) · Art. 2.4.3 (Determination and disclosure of the capacity price) (article titles: unofficial translation) ²Source 2Korea Power Exchange (KPX), *2025 Electricity Market Statistics* (「2025 전력시장통계」), overview of annual electricity market statistics (printed p. 29)See in sources →2 Korea Power Exchange (KPX), *2025 Electricity Market Statistics* (「2025 전력시장통계」), overview of annual electricity market statistics (printed p. 29): Korea Power Exchange (KPX), *2025 Electricity Market Statistics* (「2025 전력시장통계」), overview of annual electricity market statistics (printed p. 29) ³Source 3Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정)scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001See in sources →3 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded)· basic principles (investment priority; set once a year, adjusted quarterly)· settlement payment adjustment formula· readjustment factor floor 0.0001: Korea Power Exchange (KPX), ^*8More precisely *8Electricity Market Operation Rules**8 Electricity Market Operation Rules*(https://www.kpx.or.kr/board.es?mid=a10205010000&bid=0030) (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Schedule 23, Adjustment of settlement payments for electricity price stability, etc. (별표23 전력가격 안정 등을 위한 정산금 조정) — scope (pumped storage and new & renewables excluded) · basic principles (investment priority; set once a year, adjusted quarterly) · settlement payment adjustment formula · readjustment factor floor 0.0001 ⁴Source 4Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.)See in sources →4 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26)· Art. 21.10 (Measures for electricity price stability, etc.): Korea Power Exchange (KPX), ^*9More precisely *9Electricity Market Operation Rules**9 Electricity Market Operation Rules*(https://www.kpx.or.kr/board.es?mid=a10205010000&bid=0030) (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 1.1.2 item 4 (definition of the settlement adjustment factor, added 2006-12-26) · Art. 21.10 (Measures for electricity price stability, etc.) ⁵Source 5Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 21.7 (Approval) para. 1 item 4approval of the Minister of Climate, Energy and Environment when changing the settlement adjustment factorSee in sources →5 Korea Power Exchange (KPX), *Electricity Market Operation Rules* (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 21.7 (Approval) para. 1 item 4 — approval of the Minister of Climate, Energy and Environment when changing the settlement adjustment factor: Korea Power Exchange (KPX), ^*10More precisely *10Electricity Market Operation Rules**10 Electricity Market Operation Rules*(https://www.kpx.or.kr/board.es?mid=a10205010000&bid=0030) (「전력시장운영규칙」, version in force from 2026-07-25; unofficial translation), Art. 21.7 (Approval) para. 1 item 4 — approval of the Minister of Climate, Energy and Environment when changing the settlement adjustment factor ⁶Source 6Ministry of Climate, Energy and Environment, *All-out effort for stable power supply despite forecast of record summer peak demand* (「올여름 역대 최대전력수요 전망에도 안정적인 전력수급에 총력」, press release, 2026-06-25; unofficial translation), attachment p. 4all-time No. 1, 2024-08-20, 97.1 GW. Copy posted by the KDI Economic Information and Education Center. "About 1.5 times" is a rough figure from 146,157 MW ÷ 97,100 MW ≈ 1.51.See in sources →6 Ministry of Climate, Energy and Environment, *All-out effort for stable power supply despite forecast of record summer peak demand* (「올여름 역대 최대전력수요 전망에도 안정적인 전력수급에 총력」, press release, 2026-06-25; unofficial translation), attachment p. 4 — all-time No. 1, 2024-08-20, 97.1 GW. Copy posted by the KDI Economic Information and Education Center. "About 1.5 times" is a rough figure from 146,157 MW ÷ 97,100 MW ≈ 1.51.: Ministry of Climate, Energy and Environment, ^*11More precisely *11All-out effort for stable power supply despite forecast of record summer peak demand**11 All-out effort for stable power supply despite forecast of record summer peak demand*(https://eiec.kdi.re.kr/policy/materialView.do?num=283259) (「올여름 역대 최대전력수요 전망에도 안정적인 전력수급에 총력」, press release, 2026-06-25; unofficial translation), attachment p. 4 — all-time No. 1, 2024-08-20, 97.1 GW. Copy posted by the KDI Economic Information and Education Center. "About 1.5 times" is a rough figure from 146,157 MW ÷ 97,100 MW ≈ 1.51.