The Diet on Wednesday enacted a law that will separate electricity generation from transmission in April 2020, as the final step of a drastic, three-stage shake-up of the nation’s power sector.
The first stage saw the creation in April of an independent body for coordinating cross-regional electricity supply, while the second entails the full opening up next year of the retail electricity market after six decades of domination by regional monopolies.
The Diet also enacted a law that will enable full liberalization of the city gas retail market around 2017.
The electricity law enacted Wednesday will oblige power companies to spin off their power transmission and distribution sections into separate units, potentially opening power grids to new entrants.
Currently, 10 regional utilities handle all aspects of electricity operations within specified regions, from generation to transmission and distribution.
The government has been pushing top-to-bottom reform of the sector since the 2011 nuclear crisis at the Fukushima No. 1 plant exposed vulnerabilities in the grid, with shortages and higher electricity prices.
Utilities are uneasy about such drastic reform, which is expected to intensify competition. They argue that stable power supplies should be the priority.
Their business conditions have deteriorated amid higher import costs for fossil fuels, with all of the nation’s reactors remaining offline following the nuclear crisis.
Responding to strong calls from the power sector, the law includes a clause stating that the government will take “necessary measures” in light of electricity supply and demand conditions when implementing the separation of power generation and transmission — which suggests that the reforms might slow down if the utilities voice concern amid uncertainties over restarting idled nuclear plants.
Japan started liberalizing its electricity market in the 1990s, allowing more competition in supplies for large-lot factories and corporate customers. But the market for households and other small-lot consumers has remained monopolized by regional utilities up to now.