The recent revision to the law on electricity business marks only the first step in a three-stage reform of Japan's power utility industry that will take years to complete. Continued vigilance is needed to make sure that the reform will not be watered down in the subsequent process and will achieve greater competition by facilitating entry of new suppliers to the market, thereby offering consumers more choice in services at lower costs.
The revised law enacted by the Diet on Oct. 13 set in motion a long process of freeing up the nation's electricity sector from the regionally monopolized supply system, which dates back to 1951. An independent body will be created by around 2015 to coordinate power supply by observing demand nationwide. When a power shortage is feared in one region, the entity will have the authority to order utilities in other regions to share electricity with it, by boosting their own power generation if necessary.
The subsequent process of reform is set in the supplementary provisions of the law. According to the timeline, the government will submit separate legislation to the Diet in 2014 to fully liberalize the retail electricity market by around 2016, allowing new entrants to sell electricity to households — business that has been monopolized by the existing 10 major regional power companies.