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Gov't approves bills to free up Japan's electricity retail market
[February 27, 2014]

Gov't approves bills to free up Japan's electricity retail market

(Japan Economic Newswire Via Acquire Media NewsEdge) TOKYO, Feb. 28 -- (Kyodo) _ The government approved on Friday bills that will set the stage for Japan to move ahead with liberalization of the retail electricity market that has largely been dominated by regional monopolies over the past 60 years.

The liberalization of the market for households and other small-lot consumers around 2016 is the second part of a three-stage electricity reform the government has decided to carry out after a huge earthquake and tsunami in March 2011 -- which also triggered a nuclear crisis -- exposed the vulnerability of Japan's power system.

According to the Economy, Trade and Industry Ministry, the market size to be freed up totals 7.5 trillion yen. Market competition is expected to increase with the entry of new suppliers such as from gas, oil and telecommunications industries.

Households and other consumers, meanwhile, will be allowed to choose suppliers, including those that can provide cheaper electricity prices than utilities that have serviced their regions.

To protect consumers from facing a rise in electricity rates when competition does not intensify, the government plans to retain for a certain period the current electricity price-setting system intended to prevent regional utilities from setting unjustly high rates by taking advantage of their dominant positions.

A law to implement the first stage of the planned reform was enacted in November. Under the law, an independent entity will be created around 2015 to coordinate power supply with demand nationwide.

In the third stage, regional utilities will spin off their power transmission and distribution sections into separate companies from around 2018 to 2020 so that power grids will become more accessible to new entrants and lead to fair competition.

The government plans to submit to the parliament a bill to achieve the third stage of the reform during the ordinary Diet session next year.

Up to now, a total of 10 utilities have handled all aspects of electricity in the region, from generation to transmission and distribution, as well as retail.

But the triple disasters in 2011, which created power shortages, led the country to notice it is lacking a system that enables electricity to be transmitted beyond regions more freely and can respond to an increase in renewable energy amid the need to diversify its power sources.

Japan has relied on nuclear power for about 30 percent of its electricity supply, but all of its reactors are currently offline amid safety concerns heightened in the wake of the devastating accident at the Fukushima Daiichi nuclear complex.

(c) 2014 Kyodo News International, Inc.

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