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Business

New power providers carve role in Japan's liberated market

Lower rates, focus on urban areas buoy sales as some approach major utilities

Liberalization has opened Japan's retail electricity market to players like Tokyo Gas.   © (Courtesy of Tokyo Gas)

TOKYO -- New players are climbing the ranks in Japan's deregulated retail power market, collectively surpassing four out of 10 major utilities in household electricity sales.

Since the market's liberalization in April 2016, a swarm of newcomers entered the industry such as oil and gas companies and even telecom businesses. The new players began offering rates about 5% lower on average than major providers, helping them attract households, especially those with heavy power usage.

Sales volume of the 230 or so new power providers exceeded those of four major regional utilities in April -- Hokkaido Electric Power, Hokuriku Electric Power, Shikoku Electric Power and Okinawa Electric Power -- after narrowing the gap in preceding months. The newcomers' sales volume totaled 1.26 billion kilowatt-hours that month for low voltage electricity used typically in households, trade ministry statistics show.

Geography played a major role in the shift. While the four utilities operate in outlying regions of Japan, the new providers concentrate on urban areas surrounding Tokyo and Osaka, where electricity demand is high.

Tokyo Gas, Osaka Gas and JXTG Holdings' JXTG Nippon Oil & Energy, which already had solid existing customer bases, have snapped up new electricity contracts. Tokyo Gas, with 320 million kilowatt-hours of electricity sold, is approaching Okinawa Electric's 380 million kilowatt-hours. The gas company has secured the most contracts among the newcomers, and aims to clinch another 1 million contracts in a year.

About 4.55 million users had switched to such new providers by the end of July, says the Organization for Cross-regional Coordination of Transmission Operators.

But one expert says the new utilities need to develop new services, such as energy audits aimed at improving efficiency, to rise beyond 5% market share. Most new providers do not generate their own electricity, and this factor constrains cost reductions.

(Nikkei)

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