The Japanese government yesterday approved a long-sought after plan to open up its power industry after the 2011 disaster at the Fukushima Dai-ichi nuclear power plant renewed calls for more competition in the sector.
The reforms, which still need approval from parliament, would be the first major overhaul of Japan’s power industry since the early 1950s, when regional utilities were established across the nation.
Since then, the sector has been effectively monopolized by 10 regional firms engaged in power generation, distribution and retail.
The Japanese Cabinet has approved a scheme presented by an expert panel which called for the utilities to be split among their various business lines, with all restrictions on pricing to be eliminated by 2018 at the earliest.
Opening up Japan’s power grid to new competition would ultimately benefit industrial and individual consumers, Japanese Minister of International Trade and Industry Toshimitsu Motegi said.
“These reforms concern the whole industry, ranging from upstream procurement and power generation to downstream retail and consumption,” he said.
“The demand side will have more options, which will lead to lower electricity prices,” he was quoted by Japanese media as saying.
The country has been hit by soaring energy import costs since shutting down its nuclear reactors after the tsunami-earthquake crisis two years ago and turning to pricy fossil fuel alternatives.
Fukushima operator Tokyo Electric Power Co was forced to raise its electricity rates for millions of customers to help meet massive compensation and clean-up costs.
Separately, Japan is preparing to create the world’s first futures trading contract for liquefied natural gas (LNG) in a bid to stabilize the commodity’s price as demand soars, a ministry official said yesterday.
Resource-poor Japan and South Korea are the world’s two top buyers of LNG, with East Asia accounting for about 60 percent of global demand, but the region also tends to pay higher prices with shipping costs expensive and rates varying from place to place.
In Asia, the price for LNG is index-linked to oil, which means that Asian buyers tend to pay far more than those in North America, where price is determined on the basis of supply and demand.
Big price differences for LNG — natural gas that is temporarily liquefied for easier storage and transportation — underscored the need for its own trading contract, the official said, adding that Tokyo wants to make the contract a reality within two years.
“We want to create a system that serves as a new indicator — reflecting the true supply and demand conditions of LNG — and to stabilize its price,” the official said.
The contract would be traded at the Tokyo Commodity Exchange, with Japan saying it hopes to encourage gas users in South Korea and Taiwan to take part in the market, and later, US gas suppliers.
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