The trade and industry ministry plans to submit to the Diet a bill to liberalize the market for the retail sale of city gas to small-scale users such as households and shops. At present, some 200 city gas companies across the country enjoy regional monopolies under specific regulations. Consumers cannot choose their gas suppliers.
It is hoped that the reform will lower gas rates for consumers through competition, but safety concerns specific to the gas supply business should not be set aside in the push for liberalization.
The plan, which the ministry hopes will be implemented in 2017, will be a finishing touch to the gradual liberalization of the nation’s city gas business, which started in 1995. At present, newcomers are allowed to enter the business of selling gas to large-scale users, such as factories, each of which consumes at least 100,000 cubic meters of city gas a year.
Companies from such sectors as oil, power generation and trading houses are competing with city gas companies in this market, which accounts for 65 percent of the total city gas consumption in Japan.
New entrants currently have a 12 percent share of the market of business with large-scale users.
The market for small-scale users, still covered by regional monopolies, accounts for 35 percent of the nation’s city gas consumption. The gas companies are allowed to add a certain margin of profit to the total cost in setting their rates.
As a result, the rates for small-scale consumers are higher than what large-scale users pay in the liberalized market.
If the planned liberalization is carried out, new entrants will pay to use gas pipes owned by existing city gas companies to supply to customers.
One issue being weighed by a ministry panel discussing the matter is whether to separate gas pipe management from Japan’s top three city gas retail firms — Tokyo Gas, Osaka Gas and Toho Gas based in Nagoya. The ministry thinks the scheme will give new entrants equal access to gas pipes, thereby promoting competition.
The three major gas companies oppose the separation scheme, saying they currently give equal treatment to retailers that use their pipes to sell gas to large-scale users. They say full disclosure of information on the fees for using their gas pipes will ensure equitable treatment.
They contend that if their gas pipe management and retail operations are separated, they will have to divide the work of examining and repairing gas pipes and other equipment, creating problems for the security system, especially in time of disaster. To prevent gas leaks, they argue, they should be responsible for the safety of the total gas supply system — from gas pipes to the gas equipment used at customers’ homes.
While market liberalization should be pursued to lower gas fees for consumers, it is also important to ensure a safe and stable supply of city gas. The arguments by the major gas suppliers appear to make sense.
The ministry should fully discuss whether separation of gas pipe management and retail operations is essential to allow greater competition in the market.
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