Electricity and Gas Industry Reform

Purpose of the Reform

The central government has been proceeding with the reform of the electricity and gas industries as part of its policy of drastically reviewing the energy supply system in Japan following the major disaster that hit eastern Japan in March 2011. The reform is intended to ensure stable power and gas supply at reasonable prices while providing consumers with various energy options. Efforts to reform the electricity industry are advancing ahead of the one for the gas industry, with discussion focused on establishing a new legal framework.

The reform of the electricity trade system has been implemented in a phased manner, with the purpose of 1) ensuring stable supply; 2) curbing power charges as much as possible; and 3) expanding options available on the demand side and business opportunities for energy business providers.

Purpose of the Reform

Meanwhile, gas industry reform is aimed at (1) ensuring stable natural gas supply, (2) lowering gas charges as much as possible, (3) diversifying services for users and broadening our business opportunities, and (4) expanding natural gas applications. Gas industry reform is carried out step by step, just as electricity industry reform is.

Purpose of the Reform

Flow of the Reform

Amendments to the Electricity Business Act and the Gas Business Act were enacted following Diet passage in June 2015. The enactment concretized a time schedule for reforming the electricity and gas service systems. Before the enactment, retail sales of electricity and gas had been deregulated in a phased manner. The 2015 amendment paved the way for the complete liberalization of the retail power market in April 2016, to be followed by the full liberalization of the retail gas market in 2017, including gas services for households, enabling all customers to choose power and gas suppliers freely.

■Electricity and Gas Industry Reform
Electricity and Gas Industry Reform

Changes in Gas Business Categorization and Security Responsibility

Japan's gas business had previously been divided into two categories-general gas business and gas business for large-lot users. The business, however, has been reclassified into three categories-gas processing, gas pipeline business and retail -following the reform of the gas business system.

In the retail sector, regional monopolies, a practice that had been granted to major gas suppliers for years, were removed. Furthermore, regulations on gas prices were basically lifted, allowing gas retailers to offer various price options to customers in accordance with their needs.

Meanwhile, the general gas pipeline business was not deregulated in view of the important role of installing gas pipelines being undertaken by pipeline engineering firms, allowing them to retain a regional monopoly.

Gas retailers, including new entrants, are obligated to conduct safety checks of gas appliances installed at households. They are also required to explain how to prevent gas accidents to customers.

Companies specializing in general pipeline installation are tasked with maintaining and operating gas pipes that connect to gas facilities set up at customers'homes. These companies are obligated to conduct emergency safety checks and checks aimed at detecting gas leakage from household gas pipes.

All gas pipeline companies and gas retailers, including new entrants, are obligated to collaborate with each other to ensure safety both at ordinary times and during emergencies such as natural disasters. For example, in order to speedily respond to customer needs in the event of a natural disaster or set up an emergency system swiftly for early reconstruction following a disaster, these companies need to conduct joint training and drills and promote information sharing at ordinary times.

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