Japan Gives Consumers Greater Sway in Choosing Power Retailers

  • Households able to select electricity provider for first time
  • More than 250 companies cleared to sell power in open market

Japanese consumers will be able to choose their power providers for the first time Friday as part of a decades-long opening of the county’s electricity market aimed at weakening the grip of regional power utilities.

The opening is being promoted as a way to lower prices and create opportunities for foreign investors in the nation’s low-voltage electric market, giving greater choice to roughly 85 million households and small businesses, which account for about 38 percent of consumption. The liberalization follows earlier reforms for high-voltage consumers.

The changes may spell the end of the dominance of Japan’s power market by 10 regional utilities, including Tokyo Electric Power Co., which has left consumers with little choice. With more than 250 companies now approved to sell power, regional utilities are concocting new strategies to shore up revenues.

“The experience of other markets tells us that the liberalization process is rarely finished overnight,” James Taverner, an analyst at IHS Inc., said by e-mail. “Consumers can expect to see lower prices in the short term as new entrants try to lure them with special offers and lower tariffs. But, fundamentally, Japan’s electricity prices will remain heavily dependent on underlying fuel costs.”

Fukushima Disaster

The liberalization is part of reforms enacted after the March 2011 Fukushima earthquake wrecked Tokyo Electric’s Daiichi nuclear plant leading to the shutdown of Japan’s atomic fleet and forcing utilities to rely on more expensive fossil fuels. Since the disaster, household electricity rates increased as much as 25 percent, according to Hirohide Hirai, a director-general at the Ministry of Economy, Trade and Industry.

The reforms come amid tepid demand, with power use expected to grow 0.5 percent over the next decade, according to a forecast by Japan’s Organization for Cross-Regional Coordination of Transmission Operators. Consumption fell to a 17-year low last year.

New entrants have already begun flexing marketing budgets to attract customers, offering everything from discounted Internet services to points that can used to purchase products such as alcohol, electronics or motor fuel. Companies are also using mascots to lure consumers with Tokyo Gas Co. introducing a yellow and white bear character named Denpa-cho and wireless carrier SoftBank Group Corp. employing its white dog called Oto-san.

“People living in Japan are already seeing so many TV advertisements about changing from the big giants to newcomers,” METI’s Hirai said. “Those types of ads are daily.”

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