Japan to mull opening regional gas markets
The Yomiuri Shimbun/Asia News NetworkJapan's Economy, Trade and Industry Ministry will consider ending regional monopolies on gas retailing to households, and fully liberalizing the market, possibly in 2016, which would enable consumers to buy gas from any supplier they like, The Yomiuri Shimbun learned on Monday.
September 4, 2013, 6:36 pm TWN
By promoting the full liberalization of the gas supply market, along with the liberalization of the electricity market in 2016, the ministry hopes to promote the mutual entry of power companies and gas suppliers into each other's business sectors, which would lower rates and enhance services.
The ministry plans to establish a panel of experts — comprising academics, representatives of consumers and energy experts — in October. After having the panel examine any problems in the current system, the ministry plans to discuss a revision of the Gas Business Law, which permits the regional monopoly on gas retailing to households.
Gas sales to such high-consumption users as factory operators, with a yearly supply contract of at least 100,000 cubic meters, has already been liberalized, and major power companies have entered the market.
Due to the rising prices of liquefied natural gas, the raw material for gas, as well as the yen's depreciation, the gas rates of four major city gas suppliers, including Tokyo Gas Co., have risen by an average of 10 percent since the Great East Japan Earthquake in March, 2011.
The ministry intends to hold down the gas rates by strictly screening requests for rate hikes by gas suppliers, but it has also concluded there is a need to promote competition by liberalizing the market.
The government plans to fully liberalize the electricity industry in 2016 while removing its control over utility rates and separating the power generation sector from the supply/transmission sector sometime between 2018 and 2020.
Should the gas sector be fully liberalized, businesses such as oil companies are expected to enter the market besides power companies.
New entrants are expected to make use of the pipelines owned by gas suppliers and pay the usage charge to the suppliers. The panel is expected to discuss the rules on the usage of gas and the charge. It will also discuss the removal of the so-called total cost formula, under which overhead expenses, including personnel costs, are to be added with a certain profit margin.
There are as many as 209 gas suppliers in Japan, many of which are small to medium-sized operations. However, there are no major gas pipelines connecting such major cities as Tokyo and Osaka, unlike the nationwide networks of power transmission and supply lines of the 10 major power companies.
To promote new entries into the gas supply market, it is necessary to create an environment where operators have equal access to LNG bases and pipelines.