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TEPCO told to improve its business practices


November 18, 2016

Ministry warns TEPCO subsidiary over driving up wholesale power prices



An energy transaction watchdog has warned a subsidiary of Tokyo Electric Power Co. Holdings Inc. (TEPCO) over illicitly driving up wholesale electricity prices by selling power at unreasonably high rates.

The Economy, Trade and Industry Ministry's Electricity and Gas Market Surveillance Commission (EGC) advised the subsidiary, TEPCO Energy Partner Inc., on Nov. 17 to improve its business practices.

Many smaller power companies have entered the market following retail electricity liberalization, purchasing power on the Japan Electric Power Exchange (JEPX). However, these small firms have difficulty procuring power if the wholesale prices rise.

TEPCO Energy Partner denied any wrongdoing, but suggested that it would comply with the ministry's order. "We had no intention of manipulating market prices, but will respond to the advisory in an appropriate manner," a company official said.

TEPCO Power Grid Inc., which manages the group's power distribution network, was also issued a business improvement order by the EGC this past June for a delay in notifying smaller power companies of their electricity usage.

TEPCO Energy procures electricity from the TEPCO group, and supplies power to households and sells power on the JEPX. The company put power up for sale on JEPX's spot market -- the market for electricity to be delivered the following day -- at unreasonably high prices between April and August this year, according to the surveillance commission.

The products traded on the JEPX spot market are for 30-minute slots adding up to a 24-hour day. Due to sell orders by TEPCO Energy, power prices were driven up in about 60 percent of daytime slots, with the price rising by some 30 percent in at least one slot.

TEPCO Energy set minimum prices at the same level as the cost of procuring power, based on which the retail prices are calculated.

Considering that TEPCO Energy has an overwhelming influence on JEPX prices, the surveillance commission deemed that this practice constituted intent to drive up prices. The watchdog also hinted at the possibility that the company attempted to avoid supplying power to its rivals at lower prices.

"If a company that produces a massive amount of electric power takes an action like this, it could prevent other business operators from procuring necessary power from the market at fair prices and hinder new companies' entry into the retail market, and to maintain and expand their business," the commission stated.

The commission then urged TEPCO Energy to report measures the firm will take to prevent a recurrence within a month. In response, TEPCO Energy issued a statement saying, "We've voluntarily eliminated the minimum selling price. We'll continue to sincerely contribute to revitalizing the power wholesale market."

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