Japan Lawmakers to Debate Power Industry Reform, Nishimura Says

Japanese lawmakers will debate legislation this Fall that calls for the break-up of power companies by separating their generation and transmission assets, Deputy Economy Minister Yasutoshi Nishimura said.

A bill on electricity industry reform will be submitted to the Diet in the autumn session, Nishimura said today at the World Economic Forum in Dalian, China. Nishimura also reiterated the government’s pledge to produce a new energy strategy before the year’s end, noting that the future of nuclear power in Japan isn’t certain.

The Fukushima nuclear disaster in March 2011 has prompted a government examination of Japan’s power system that allows all aspects of electricity production, transport and distribution to be dominated by the country’s 10 regional utilities. The utilities have argued their control of both generation and transmission makes for a more stable and secure electricity supply, even as it deters competition.

A break-up of the industry would erode sales at the 10 power monopolies, which combined rang up 17.8 trillion yen ($179 billion) in the last fiscal year ended March 31, according to data compiled by Bloomberg. It may also portend more focus on renewable energy, as companies including Softbank Corp. (9984) have pledged to invest in solar and wind power in Japan on the basis that industry reform should give them equal access to transmission lines to gas and coal-fired stations.

Japan is looking at ways to lower electricity costs after greater reliance on imported natural gas in the wake of the Fukushima disaster pushed up power prices. The opening up of new gas supplies from the U.S. starting 2017 will also help reduce fossil fuel import costs that run into trillions of yen, Nishimura said.

“We’ll start shale gas imports from the U.S. and that will help” reduce energy costs, Nishimura said. “Until then we will build smart cities to conserve energy.”

The role of nuclear energy remains “unclear” in Japan and the government isn’t likely to resolve it before the end of this year, Nishimura said. A plan detailing the “direction of energy policy,” which will include a position on nuclear energy while leaving out the size of its contribution to the energy mix, should be ready before the end of the year, he said.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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