Japan to open residential power market to competition

Japan to open residential power market to competition
An employee of Kyushu Electric Power Co walks in front of reactor buildings at the company's Sendai nuclear power plant in Satsumasendai, Kagoshima prefecture, in this April 3, 2014 file photo.

TOKYO - Japanese lawmakers voted overwhelmingly on Wednesday to open up the residential electricity market to full competition, the latest step in a radical shakeup of the power industry in the wake of the Fukushima nuclear disaster.

The change frees up a 7.5 trillion yen (S$91.30 billion) market to all companies from around 2016, allowing them to sell electricity and other services to almost 77 million households and 7.4 million small business, according to government figures.

The move will expose Japan's 10 regional power monopolies to new competition after the government seized on public anger over shortcomings brought to light by the 2011 tsunami and meltdowns at the Fukushima Daiichi station to reform the industry.

Winners include new operators who have been entering the market with leaner operations, lower overheads and new technologies. Investment in solar energy has surged after the introduction of new tariffs to encourage the industry. "The amendment ... gives people the freedom to choose their electricity suppliers based on their own preference," said Hisayo Takada of Greenpeace Japan said in a statement.

The reform bill was passed in the Upper House by 211 votes to 26, a parliamentary official said. The Lower House approved the legislation last month.

The three-stage reform programme is a central plank of Prime Minister Shinzo Abe's drive to overhaul the economy, as high energy costs weigh on businesses and consumers.


The changes have already led to new suppliers emerging and have sparked a surge in companies aiming to become registered power producers and suppliers (PPS) in anticipation of the latest legislation.

Well known Japanese corporates including Mitsui & Co and Nippon Paper Industries Co have registered to be PPS, but the swelling ranks of those signing up includes companies such as marina operator Wako Hiroshima Boatpark Co.

By Monday, there were 244 registered PPS, compared with about 100 in September last year, the latest figures show.

The independents not only undercut the monopolies by accepting lower profit margins, they also provide power management systems and flexible buying plans to reduce prices and save energy.

Many also trade electricity and use plant and infrastructure paid for by other firms, so they don't have to recoup those costs.

Greenpeace's Takada said the government should increase the uptake of renewable energy as an alternative to nuclear energy. All of Japan's 48 commercial reactors are shut down for safety checks with no timetable for restarts set.

Operating solar installations have more than doubled to about 13,500 megawatts by February since the new tarriffs were introduced, according to the latest government figures.


Tokyo Electric Power Co, the operator of the wrecked Fukushima plant, Kansai Electric Power Co and other regional monopolies are turning to each others regions after suffering huge losses since the shutdown of reactors forced them to increase imports of fossil fuels.

The monopolies, who until now have controlled all aspects of generation and transmission, are already losing customers after raising prices and analysts say that may increase when more choices are availailable. "If there is a steady stream out it will cause a lot of problems," said Gerhard Fasol, the founder of Eurotechnology Japan, a Tokyo-based consultancy on energy and technology issues. "Even if they lose 5 per cent it will be a huge disruption." Independent companies still need access to the utilities'power grids before they can win significant market share. A bill passed in November allows for a national grid operating company to be set up in 2015 to allow all suppliers equal access.

The final phase of the reforms require regional monopolies to spin off their transmission and distribution operations into separate entities by 2020. Legislation for this is due to be introduced next year.

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