Tohoku Electric Power Co., Japan's third-biggest coal user, will start trading coal swaps for the first time to manage price volatility risk as it prepares for liberalization of the electricity market.

The Sendai-based utility plans to begin using swap contracts against the Newcastle coal index price published by globalCOAL as early as this fiscal year, said Kaoru Hijikata, a deputy general manager of the company's planning department.

Hijikata, who has worked at companies including Enron Corp., UBS Securities Japan Co. and Sumitomo Corp., joined Tohoku Electric in April to help expand the use of derivatives and help prepare for the planned deregulation.