ArrowArtboardCreated with Sketch.Title ChevronTitle ChevronEye IconIcon FacebookIcon LinkedinIcon Mail ContactPath LayerIcon MailMenu BurgerPositive ArrowIcon PrintIcon SearchSite TitleTitle ChevronIcon Twitter
Economy

Japan girding for battle royal over power market deregulation

TOKYO -- Japan aims to liberalize electricity retailing by 2016 in the second phase of sweeping energy-industry reforms. But the nation's powerful electricity sector and lawmakers with its backing are gearing up for a fight to block deregulation that will open up a market worth more than 7 trillion yen ($67.8 billion).

     Past attempts to restructure the industry have failed due to intensive lobbying by the 10 major utilities that have long monopolized power generation, transmission and distribution in their respective regions.

     The current reform plan, hatched after the Fukushima nuclear disaster, unfolds in three stages. The first, already set in motion with the passage of a bill last autumn, paves the way for the integration of the power grid with the creation of a national transmission oversight entity. The second stage, for which the legislative process is now beginning, will liberalize the power market by ending regional monopolies and letting consumers choose their providers. Lastly, utilities will be forced to separate power generation and transmission operations between 2018 and 2020.

     The change will usher in big challenges for established players by forcing them to share the electricity market, worth 7.5 trillion yen by government estimates, with new entrants. The largest share, 2.7 trillion yen, is on Tokyo Electric Power's turf, followed by Kansai Electric Power and Chubu Electric Power, with 1.2 trillion yen and 960 billion yen at stake.

     The industry ministry, which will submit draft legislation Wednesday to the ruling Liberal Democratic Party, worries that the entire process could fall behind schedule should the second phase is held up by industry resistance.

     The reform will require considerable legislative legwork -- revising 40 or so different laws related to the electric power industry, in fact. For example, the commodity futures transactions law must be modified to cover electricity, which is expected to become actively traded.

     Lawmakers also plan to revamp a law that forces utilities to purchase electricity generated from renewable sources, shifting the onus of paying fixed prices for the clean energy to power retailers.

     Liberalization will allow consumers to shop for watts across the entire country. But households will also face the risk that no one will supply them, since electricity giants will be freed of the obligation to provide power. Lawmakers thus plan to include measures to protect the supply. Customers will be guaranteed a certain amount of electricity by contract, and retail suppliers will have to explain fees.

     Despite the hopes placed in such measures, opposition remains deeply rooted. The big power companies saw their finances deteriorate after nuclear reactor shutdowns made them more reliant on costlier fossil-fuel-powered facilities. In light of this strain, the industry has begun pushing the idea that a delay in bringing nuclear plants back online should justify delaying deregulation.

     Dissent has emerged from within the ranks of Prime Minister Shinzo Abe's party. In an LDP meeting Thursday, some threatened to halt reforms with a new bill should Japan's nuclear plants still sit idle two years from now. Others complained that supply stability was taking a back seat to other concerns and questioned the need for reform in the first place.

(Nikkei)

Sponsored Content

About Sponsored Content This content was commissioned by Nikkei's Global Business Bureau.

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this monthThis is your last free article this month

Stay ahead with our exclusives on Asia;
the most dynamic market in the world.

Stay ahead with our exclusives on Asia

Get trusted insights from experts within Asia itself.

Get trusted insights from experts
within Asia itself.

Get Unlimited access

You have {{numberArticlesLeft}} free article{{numberArticlesLeft-plural}} left this month

This is your last free article this month

Stay ahead with our exclusives on Asia; the most
dynamic market in the world
.

Get trusted insights from experts
within Asia itself.

Try 3 months for $9

Offer ends June 30th

Your trial period has expired

You need a subscription to...

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers and subscribe

Your full access to the Nikkei Asian Review has expired

You need a subscription to:

  • Read all stories with unlimited access
  • Use our mobile and tablet apps
See all offers
NAR on print phone, device, and tablet media