Trends and Issues in the Deregulation of the Electric Power Industry

No.80
May 2000
Senior Fellow Reiji Takeishi

1. Following revision of the Electric Utility Law on March 21, 2000, the deregulation of retailers was introduced, aimed at commercial-scale utility consumers who make up 27% of electricity demand. This legal change was a continuation of a 1995 revision, which at the time was the first revision of the Electric Utility Law in 31 years. The move's objectives are to encourage competition and lower the price of electricity fees, which are seen as being relatively expensive internationally, but the effects of deregulation are limited.
2. The March 2000 consignment system targeted at commercial-scale utility consumers has been met with criticisms that the consignment fees are too expensive. Based on calculations of the power transmission costs for major electric utility companies (which are the most common electric companies), the burden carried by the average company is thought to be too high and to serve as a barrier to newcomers aiming to enter the electric utility market.
3. In spite of this, it is thought that companies that bid unsuccessfully for IPP (independent power producers) bids-and whose businesses are based around the possession of raw materials for that surplus power-will be able to gradually enter the electric utility industry on a limited scale. In order to encourage entry, a preemptive reevaluation of the scope of deregulation, initially set for three years hence, must be conducted as soon as possible; this includes reevaluating the price of consignment and setting the scope of deregulation to high-consumption electricity users of 10,000 volts or more.
4. Even with present consignment prices, if an electric power provider appears and engages in consignment-for example, consignment to a limited-scale electricity provider within the Tokyo Electric Power Co.'s jurisdiction, or consignment to a company within Tokyo Electric Power Co.'s jurisdiction from an outside jurisdiction, like the Tohoku Electric Power Co.'s provider area-it would be possible for deregulated commercial-scale utility consumers to reduce electricity costs by as much as 10 percent. For commercial-scale utility consumers whose office-related electricity prices are relatively expensive in comparison to that of electricity costs for industrial use, a gradual disengagement can be predicted.
5. In the future, it will become possible to lower the relatively high import price of LNG (liquid natural gas) by means of negotiating the terms of importing gas through a gas pipeline project. By pursuing the establishment of infrastructure for such a project, it will be possible to lower the current price of electricity by as much as 20 percent.

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