Japan plans to let households choose their electricity suppliers in 2014 at the earliest, overriding long-standing opposition from major utilities and threatening to weaken their virtual regional monopolies.
The government has been considering ways to promote competition in prices and services by reviewing the operations of the 10 regional electric power companies since the accident at the Fukushima No. 1 nuclear power plant.
At a meeting of the industry ministry’s electricity system reform committee on May 18, members agreed, in principle, to allow new suppliers to begin sales to households and small stores.
The ministry, which has liberalized about 60 percent of the nation’s electricity supply in phases since 2000, plans to remove restrictions on the remaining sector, which comprises small-lot users with a contract capacity of less than 50 kilowatts.
Regional utilities apparently have no choice but to follow the government policy considering the heavy criticism they face over their virtual monopolies following the nuclear accident.
The ministry plans to compile specific deregulation measures in the summer and submit a bill to revise the Electric Utilities Industry Law to the ordinary Diet session as early as next year.
A senior ministry official said the ministry plans to take steps in accordance with the committee’s view.
The government may set up a preparation period of two to three years to prevent confusion over the liberalization process.
After deregulation, households will be able to choose electricity suppliers, such as those with lower rates or without nuclear power plants.
The move could accelerate the use of renewable energy because households will be able to buy electricity generated with solar, wind and other natural sources.
The ministry also plans to abolish the current system that allows regional utilities to calculate rates for households, which has been criticized as too generous for the suppliers.
Critics said the companies tend to lose the incentive to cut costs because they are allowed to add certain profits to overall costs required for power generation.
The government will have to introduce new ways to secure stable power supply in remote areas where electricity transmission is expensive or in case power companies go bankrupt.
Under past liberalization, large-lot users with a contract capacity of 50 kilowatt or more have been allowed to choose electricity suppliers and negotiate rates with them.
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