Liberalization of power, gas retailing not sufficiently benefiting consumers

The Yomiuri ShimbunMarket liberalization must be something that brings benefits to a wide variety of consumers. Efforts must be made beyond the industrial framework to pioneer new businesses and expand services.

Full liberalization of the electricity retail business began in Japan two years ago, followed by that of city gas retailing last April.

The number of new entrants to the electricity retailing business for households has totaled about 300 while that of newcomers in the city gas market has reached nearly 20. As a result of competition being stimulated, power rates offered by the new entrants have dropped by an average 5 percent compared with traditional general rates.

With the emergence of less expensive package sales, in which electricity and gas are sold together, the range of options available to consumers has become wider, centering on areas where city gas is provided.

Cross-industrial collaboration such as between Kansai Electric Power Co. and Tokyo Gas Co. and between Chubu Electric Power Co. and Osaka Gas Co. has become active.

It is laudable that major power and gas companies, which were blessed with business environment advantages such as regional service monopolies, have begun competition beyond regional frameworks as they took part in each other’s business fields.

What is not good is that the effect of rate cuts has been concentrated on urban areas. As long as new entrants rush to metropolitan areas where demand is great and all compete for a slice of the same pie, it is impossible to expect a long-term business expansion through the creation of new markets.

To extend the benefits of liberalization to regional areas, it is essential for small and medium-sized newcomers to raise their presence.

Diversify revenue sources

Decentralized power generation businesses such as those that meet local demand through renewable energy power generation could contribute to promotion of regional development.

It is hoped that expansion of a business model in which propane gas companies — existing in great numbers in local areas — collaborate with new entrants to the power generation business and offer cheaper power and gas rate plans.

Government policy assistance is also indispensable to the fostering of new participants in the utility generation business.

Newcomers, which have no self-produced power sources and procure electricity from major power utilities and the market, are often placed at a disadvantage in terms of cost.

It will become important for the government to promote the restart of nuclear reactors and establish a system under which a variety of business operators can procure electricity at low costs.

There are many cases of new entrants’ participation in renewable energy generation being hampered due to a shortage of the available capacity of power grids. The government is called on to proceed with the introduction of renewable energy resources by urging major electric utility companies to operate more flexibly.

Big power and gas utilities, which were protected by restrictions on new entrants, had long been detached from the aggressive pioneering of new business.

Tokyo Electric Power Company Holdings, Inc. is contemplating entering the water supply business, currently administered by local governments. Utilization of hydrogen energy could also be a promising area.

If new business is fostered, it will be able to provide room for power and gas price cuts. The diversification of earning sources should be accelerated.

(From The Yomiuri Shimbun, April 7, 2018)Speech


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