A panel under the Ministry of Economy, Trade and Industry basically agreed Thursday to open the retail electricity market to new entrants, and thus allow consumers to choose their own power suppliers.
Under the plan, regulations on electricity rates will be phased out in stages and fully liberalized if a competitive environment is successfully created.
Businesses that set inappropriately high rates may be ordered by the ministry to lower them or be slapped with a business improvement order.
The government plans to submit a bill to revise the Electricity Business Law to the Diet as soon as next year, but the plan would have to be finalized by the government formed after the Dec. 16 Lower House election.
The Liberal Democratic Party, which is likely to return to power in the next election, has not made its stance on electricity reform clear and uncertainties remain.
The retail electricity market for businesses meanwhile has been undergoing liberalization in stages since 2000.
The panel has been calling for the liberalization of the household electricity market to end the nation’s 10 regional power monopolies.
Under the plan, consumers would be able to choose between paying regulated and liberalized rates, which do not need government approval, for a certain period of time after the new entrants are let in.
If the rates are allowed to be set at will without first ensuring a competitive environment, suppliers may set extremely high rates.
Electricity supply to remote areas and islands would be ensured and set at the same rate as other areas, the plan says. The panel may also set up a regulatory body to monitor the market.
However, the plan did not mention a timeline for full market liberalization.
“It is necessary to first come up with a road map,” said panelist Hiroko Ota, a professor at the National Graduate Institute for Policy Studies in Tokyo.
Separately Thursday, Hiroshi Yamaguchi, vice president of Tokyo Electric Power Co., said the retail market should be liberalized only after a secure supply of electricity is ensured.
“It would be risky to change the system” when supply is outweighing demand by a small margin because the system would be transferred while electricity is supplied to consumers, he said.