TOKYO -- Tokyo Electric Power Co. will start supplying electricity to electronics volume retailer Yamada Denki in the Osaka and Nagoya areas in October, marking its first foray into business turf controlled by rival utilities.
The 19,000kW contract will cover 62 Yamada Denki stores, including 38 in central Japan and 24 in the greater Osaka region, or 40% of the locations in the two regions. Those stores have been buying electricity primarily from local utilities.
Subsidiary Tepco Customer Service will purchase, at low cost, surplus electricity produced by companies that have their own power generators, then use the grids of local utilities to deliver electricity to the stores.
Total electricity usage, estimated at 50 million kilowatt-hours, is enough to power 15,000 households.
With Tepco offering rates several percentage points lower than the stores are currently paying, the deal is expected to save Yamada Denki tens of millions of yen annually.
The utility, battered by the Fukushima nuclear accident, is working to boost sales outside greater Tokyo ahead of the full deregulation of the electricity retail market in 2016. It is negotiating to sign similar contracts with nearly 10 more companies, aiming to generate 170 billion yen in sales outside greater Tokyo in 10 years.
Electricity rates for business users in Japan rose 28% between fiscal 2010 and 2013, according to government data, as utilities raised prices over this period. But with competition in the power market slated to heat up, businesses will have more choice in selecting suppliers, enabling them to snag lower prices.
Among top utilities, Chubu Electric already supplies power in the Tokyo metropolitan area through an independent power producer, but the scale has been limited.
Yamada Denki's decision to tap an outside supplier could prompt others to follow suit, further fueling competition.