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Deregulation: What's in it for people?

March 22, 2016

What benefits, options will liberalization of electricity industry bring to consumers?




The country's retail electricity market will be fully liberalized in April, allowing consumers to freely choose and decide which companies they want to buy electricity from.

Ten major reginal power companies such as Tokyo Electric Power Co. (TEPCO) have so far been monopolizing the retail electricity market for regular households, but a number of business operators have decided to make new entrants into the market, competing to acquire customers through cheaper rate plans and other means. What changes will the power deregulation bring to people's livelihoods? The following are some key points for choosing power suppliers and related issues.

There were 253 new entrants or new electricity companies registered with the Ministry of Economy, Trade and Industry as of March 18, and nearly a half of them are planning to sell electricity to households. There are a variety of new entrants: major oil wholesalers that have their own thermal power plants; major telecom carriers that are set to sell electricity purchased from other suppliers as packages with their own services; start-up companies that are set to sell mainly renewable energy such as solar generated electricity; and other firms. They have actively been engaged in publicity campaigns to attract customers, presenting rates that are up to 10 percent cheaper than those from major power companies.

JX Nippon Oil & Energy Corp., Japan's largest oil wholesaler, emphasized its experience in selling electricity for more than a decade, with a campaign slogan saying, "We are an experienced power distributer." The company entered the electricity market for businesses in 2003. It has a production capacity of 1.63 million kilowatts of electricity that exceeds the capacity of a single nuclear power plant, using oil leftover from refining petroleum, among other means. Tokyo Gas Co., too, has been generating electricity by using liquefied natural gas it procures on its own as raw material and selling the electricity to businesses through its affiliated companies. Gas and oil companies are challenging major power companies by taking advantage of their accumulated expertise to sell electricity at low prices.

KDDI Corp., a major telecom carrier, is to enter the retail electricity market under the banner of its "au denki" brand. It will not have its own power plants, but rather receive power supplies from Kansai Electric Power Co. and other utilities. KDDI is to attract its users by returning up to 5 percent of their electricity bills to its mobile phone service contractors in the form of electric money. Jupiter Telecommunications Co., Japan's top cable television operator, is to procure electricity from a trading company that also is an investor of the telecom firm and offer discounts on electricity bills for its customers who have signed up for packages of electricity and cable television services.

In addition to rate plans for electricity supplied by TEPCO, mobile company SoftBank Corp. has set up a plan with renewable energy sources such as solar power making up 57 percent of the total supply. There have been movements aimed at securing "local production and local consumption" by utilizing renewable energy generated in each region. One of the examples is Miyama Smart Energy Co. launched by the Miyama Municipal Government in Fukuoka Prefecture.

Major power companies have prepared to compete with new electricity providers, with TEPCO, for example, offering rate plans designed to give discounts of up to 5 percent. However, Kansai Electric has abandoned its plan to start offering discounts on power bills from May after the Otsu District Court issued a provisional injunction ordering the company to suspend operations of the No. 3 and 4 reactors at its Takahama Nuclear Power Plant in Fukui Prefecture. The utilities could face an uphill battle if their nuclear reactors that are capable of generating power at low costs remain idled.

Meanwhile, new electricity providers are entering the retail electricity market mainly in densely-populated Tokyo, Osaka and other major cities. According to the Japan Organization for Cross-regional Coordination of Transmission Operators, which promotes consumers to switch power providers, there were 274,000 applications filed for new rate plans as of Feb. 26. But more than 90 percent of them were concentrated in the service areas of TEPCO and Kansai Electric. Therefore, there are still insufficient options for households in regions where the number of new entrants is small.




March 12, 2016


Knowledge is power: Navigating the household electricity market after deregulation



by Eric Johnston

Staff Writer

The country’s household and small business electricity market will be deregulated from April 1, allowing individuals to choose their electricity provider. Optimists, especially renewable energy advocates and small entrepreneurs, hope the development will break the stranglehold that the country’s 10 regional utilities have on a market worth an estimated ¥8 trillion.

However, while around 200 firms are currently prepared to sell electricity generated by a wide range of sources under a broad range of plans, utilities still control the distribution grid. That, combined with intense price competition and restrictions on how sellers advertise, means consumers hoping to reduce their dependency on, or break free entirely of, nuclear and fossil-fueled electricity after April 1 are going to have to research different firms, costs and plans very carefully before signing a contract.

At the end of February, Kansai Electric Power Co. was feeling upbeat about the future of nuclear power. Five years after the March 11, 2011, earthquake, tsunami and meltdowns at the Fukushima No. 1 nuclear power plant, it had restarted its Takahama No. 3 reactor and was preparing to extend operations of its Takahama No. 1 and 2 reactors, now more than 40 years old, for another two decades.

With a Nuclear Regulation Authority widely seen as favorable toward restarts, a fundamentally pro-nuclear Fukui prefectural governor and local town councils hosting its nuclear plants desperate for the money that comes with restarts, Kepco was confident that nuclear power was finally back.

It helped that Takahama’s No. 4 reactor was also scheduled to restart at the end of February. To the shock of Kepco officials, however, television cameras invited to broadcast live the flick of a switch to restart the reactor instead recorded loud alarms and scenes of worried staff running around, realizing there was a problem and that the reactor could not be restarted, at least on that day.

Then, in a move that shocked the utility, the Otsu District Court in Shiga Prefecture issued a provisional injunction last week that forced the Takahama No. 3 reactor to shut down a little over 40 days after it had restarted. The injunction also applied to the idled No. 4 reactor.

Why the rush to restart? Without as many of its reactors as possible back online as quickly as possible, Kepco says it will be unable to reduce electricity rates. That means the utility, which relied on nuclear power for nearly half of its electricity prior to March 11, 2011, and has enjoyed a virtual monopoly in Kansai for decades, could lose out once the country’s household electricity market is deregulated on April 1 and it faces new competition.

To date, nearly 200 enterprises — ranging from the 10 regional utilities to SoftBank, Lawson’s convenience stores and new firms emphasizing gas or renewable-generated electricity — are officially authorized to sell electricity to consumers. A price war has broken out, with some newcomers promising rates that are often lower than the utilities.

Yet the deregulation, as noted previously, is only partial. The major utilities will still be in control of the electricity grids. For the first time, however, individual consumers will be able to pick and choose who sells them the electricity off the grid.

The opening of the household and small business sector to retail competition has created a lot of interest among firms seeking to enter the market, but it has also created a number of concerns about supply and service, even as consumers express show a keen interest in switching.

A survey of 1,000 people last November by the Agency for Natural Resources and Energy on how they felt about the deregulation showed that if their electricity bills were to come down by at least 10 percent, 62 percent would consider changing suppliers. Just 8 percent said they would not switch companies, no matter how much lower the competition might be.

In an attempt to allay such fears, the government has said that switching providers will not mean a decrease in the quality of electricity and that in the event of problems at one of the newer firms with distribution, the major utilities would back them up by sending power down the line, thus preventing blackouts.

From the end of January, a number of companies began offering electricity plans on various websites.

Consumers looking for the best deals can begin by going online to those websites that compare the different firms, their provider contracts and prices. Three popular sites (available only in Japanese) can be found at Kakaku.com, Enechange.jp and Enepi.jp.

Each site will request basic information, such as where you live, how many people live with you, and what kind of building (house or apartment) you live in.

You may then be asked who your current electricity supplier is, how much electricity you are contracted for and how much you actually use. The latter information is available on the meter card of your current provider.

Depending on the site, you might also be asked the amount of your most recent electricity bill, or other information about your electricity use and preferences.

Once the pertinent data has been entered, you’ll be taken to a simulation site that offers a list of firms each with different prices, plans and conditions. And it’s here where the buyer needs to beware. There are any number of plans from any number of firms. Some lock you into a two-year contract and place financial penalties if you cancel before that (very important to know if you’re planning to move within one or two years). Some plans may have strict conditions on the price offered, depending on how much electricity you buy and the time of day you want to use it.

After doing a simulation that compares prices and services from different plans, you can make your choice and sign a contract.

Roughly three weeks later, on average, the firm will send someone to your home to install a smart meter. In principle, you won’t be charged for the cost of replacing your old meter with a new one, unless there are special construction needs.

Once the new meter has been installed, you’re on the new plan and you can cancel your contract with whoever was providing you electricity before.

Kikuko Tatsumi, a member of the Nippon Association of Consumer Specialists’ environment committee, notes that many of the plans currently on offer are package deals that include services other than electricity, and that people need to consider the sorts of add-ons that might be included in a plan and consider their needs carefully.

“Don’t forget that what you’re buying is electricity,” she says.

In addition, Tatsumi cautions, be prepared for aggressive sales tactics from those representing, or claiming to represent, an electricity supplier.

“I’ve heard stories of people getting phone calls from those claiming to represent a group like the ‘security association,’ who inquire about a person’s electricity bill and say they want to visit to discuss it,” Tatsumi says. “There are a lot of complaints about flyers being stuffed in mailboxes or salespeople telephoning, trying to sell electricity plans.”

Price, of course, will be the final determining factor for many consumers. This may well mean going with firms that get their electricity mostly from fossil fuel sources (and possibly nuclear power) if they want the cheapest plan.

For environmentally concerned households that dislike nuclear power, don’t mind paying a bit extra if necessary, and demand to know what energy source the electricity from the firm they are purchasing comes from in order to select a supplier that minimizes, or even excludes entirely, coal, oil or nuclear-generated electricity, there is good news and bad news.

The good news is that firms are being encouraged to offer customers a breakdown of the different sources of electricity they’re selling, and over what period they plan to use that energy mix. For example, sellers are allowed to let households know that, over a certain length of time, they’ll be sending them electricity, of which, for example, 50 percent is generated from coal or oil, 10 percent is from liquefied natural gas, 30 percent is from nuclear and 10 percent is from renewables.

The bad news is that providing as much detailed information as possible on energy sources is not a legal requirement for the firms, merely something that is “desired.”

In fact, very few of those registered to sell electricity so far appear to be that specific. A survey of 20 firms in the March 1 edition of the Japanese magazine Economist showed less than half were offering detailed information on their sites about the energy mix they were using.

Furthermore, in the case of renewable-generated energy covered by the country’s feed-in tariff, firms are being discouraged from using phrases such as “we sell green power” or “we sell clean power.”

In one sense this is good — it will make it tougher for unscrupulous firms to misrepresent themselves by using such language if the majority of power they’re selling comes from energies that are anything but clean.

However, it also forces consumers searching for firms and plans that offer the greenest possible supply source at the most affordable price to make some tough choices if the company offering a deal within their budget won’t say where the electricity comes from.

For those want to go as green as possible, one option is to visit the Power Shift website. Run by Friends of the Earth Japan, here you will find a dozen firms (as of early March) that offer customers their energy mix and environmental impact; concentrate on purchasing renewable energy under the feed-in tariff program; agree to not use nuclear or fossil fuel-generated electricity, except as backup sources; emphasize local usage of renewable energy; and are not funded by the big utilities. Of the dozen firms currently listed, eight are in the Tokyo region, two are in Kyushu and there is one each in the Osaka and Nagoya regions.

“We interview firms that want to prioritize renewable energy and have plans for doing so,” says Akiko Yoshida of Power Shift. “Many are small — and the amount of renewable energy in Japan is still limited — so it’s really difficult for the firms we list to sell only renewable-generated electricity. It doesn’t mean companies focused on selling renewable-energy generated electricity are expensive, but they can’t offer supercheap prices, either.”

As the major utilities control the grids and because they remain wary of renewable energy, the extent to which the sector will expand from April is as yet unclear, even if some firms offer plans that are very competitive with fossil fuel electricity. By 2020, however, grid transmission of electricity will be deregulated, theoretically allowing for competition and easier access to renewable energy sources.

Of course, the utilities know this, which is why firms such as Kepco are in a race against time. Even as the Takahama reactors sit idle under the injunction, the utility wants to restart them and run them for another two decades.

Not only to revive nuclear power, which Kepco claims will allow it to lower its own prices, but also to ensure that, as Japanese bureaucrats once did when they picked and chose which industries to support, that deregulation does not lead to “excessive competition” that would threaten to impede their old ways of doing business, or cause too much “confusion in the marketplace” of the kind that is not good for the politically connected utilities.

Dissecting consumer energy choices online

For more information on finding and selecting a new electricity supplier after April 1, check the following websites:

The Electricity Market Surveillance Commission: The commission is the government body that monitors firms selling to the home electricity market. It can provide information on which ones are officially registered, and offer consultations if you run into trouble with the firm you’re buying from. www.emsc.meti.go.jp

The National Consumer Affairs Center: The center offers basic advice along the lines of “let the buyer beware,” with suggestions on the kinds of questions to ask anyone who shows up at your door on a Sunday morning, or calls during dinner and tries to sell you a new electricity plan. www.kokusen.go.jp

Electricity Plan Comparison Sites: At Kakaku.com (kakaku.com/energy), Enechange.jp (enechange.jp) or Enepi.jp (enepi.jp), consumers can log on, provide basic details about themselves, their energy lifestyles and the amount they are currently paying, and receive a list of different plans from different firms that might suit their needs.

Power Shift: This is the site for consumers who want to be clean, green and nuclear-free to the greatest extent possible using government-approved, local sellers, and don’t mind paying extra. power-shift.org/choice

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