Japan approves first power industry reforms

Reforms will weaken monopolies of regional power utilities.

Japanese lawmakers will set-up an independent body to coordinate supply and demand across Japan’s electricity grids, weakening the power wielded by the regional power utilities.

The House of Councillors or the upper house in the National Diet or parliament passed legislation calling for the creation of the body by 2015. The House of Representatives or lower house approved the bill Nov. 1.

The new body aims to increase competition by loosening the control the 10 regional utilities have in their respective areas on generation, transmission and distribution. Japan’s electricity retail market is worth some US$150 billion and only about half of that has been open to competition.

The Ministry of Economy, Trade and Industry said the step is a first move to reforming the power industry after the March 2011 Fukushima nuclear disaster.

Lawmakers are soon expected to consider bills liberalizing the retail electricity market by 2016. They will require utilities, including the biggest, Tokyo Electric Power Company and Kansai Electric Power Company, to break-up their generation, transmission and retail operations into separate legal entities from 2018 and 2020.

The utilities’ control of electricity supply has been cited as one reason power tariffs in Japan are twice those in the U.S. Utilities argue the system provides a stable power supply.

The need to reduce power prices became more acute after the Fukushima nuclear disaster of March 2011, which shut down all of Japan’s atomic plants for safety checks, increasing its dependence on more expensive fossil fuels.