(Adds Tepco also looking to sell LNG beyond Tokyo area)
TOKYO May 22 Tokyo Electric Power Co
said on Thursday it plans to sell electricity outside its
traditional service area, the latest sign that a shake-up in
Japan's power industry following the Fukushima nuclear disaster
may be taking hold.
The plan by the utility known as Tepco is a direct response
to incursions into its Tokyo area by Kansai Electric Power Co
and Chubu Electric Power Co, which are
dominant in Japan's biggest economic centres beyond Kanto, as
the capital region is known.
Japan's government is pushing through reforms to boost
competition and reduce the highest electricity rates in the
industrialized world after the meltdowns at Tepco's Fukushima
Daiichi nuclear plant - following a 2011 earthquake and tsunami
- exposed flaws in the national grid and pushed up prices.
Japan's biggest utility was taken over by the government in
2012 and is paying billions of dollars in compensation to those
affected by the disaster. Tepco has also been widely criticized
for an inept response to the disaster and for cover-ups on
nuclear safety before it, something that may hobble its attempt
to increase market share.
"It's difficult to see Tepco overcoming its reputational
issues even outside its traditional catchment areas," said Tom
O'Sullivan, founder of independent energy consultancy Mathyos
Japan's regional monopolies, set up in 1951 during the
American occupation after World War II, followed the U.S. model
at the time, with utilities controlling all aspects of power
generation and transmission with legally sanctioned
profitability in designated areas.
The government plans a radical shake-up, opening up regional
grids, each tightly controlled by the local monopoly, to all
participants by 2015 and fully liberalizing prices for
residential customers after that. A final reform stage involves
splitting up the utilities into generation and transmission
Tepco said it aims to start electricity sales nationally,
but mainly in the services areas of Kansai Electric and Chubu
Electric as early as Oct. 1 after completing the necessary
registration for sales outside its own region on Thursday.
"It's not just Chubu and Kansai, but competition in the
Kanto area has gotten very tough and we have lost costumers,"
said Hideo Sanada, a senior official in Tepco's business
strategy division. "To answer that, we want to approach
(customers) outside our supply area, outside Kanto."
Tepco has lost almost 10,000 large customers since the
beginning of April last year, according to company data.
It is aiming for 34 billion yen ($335 million) in annual
sales outside its traditional service area within three years,
and 170 billion yen within 10 years. Tepco had electricity sales
revenues of 5.9 trillion yen ($58.13 billion) in the business
year that ended in March.
The utility plans to sell 10 billion kilowatt-hours of power
a year outside the Kanto area within a decade, nearly 4 percent
of its current power sales.
Tepco said it has already begun marketing to mass retailers
and other companies with fees that undercut competitors' rates,
officials said. The discount is a single-digit percent, Hideo
Sanada, the head of Tepco's business strategy, told reporters,
without being more specific.
The power Tepco sells outside Tokyo will be bought from
companies with their own in-house generators, the country's
wholesale power exchange and possibly from other regional power
monopolies, officials said.
Tepco also said it is looking to sell natural gas beyond its
service area for the first time, putting it in competition with
traditional city gas providers. It will pitch contracts to
customers packaging power and gas sales.
Tepco currently sells around 1.3 million tonnes worth of
liquefied natural gas (LNG) annually via pipeline and LNG
trucks. It plans to nearly double that by adding sales of 1
million tonnes within a decade.
($1 = 101.4950 Japanese Yen)
(Reporting by James Topham, Osamu Tsukimori and Aaron
Sheldrick; Editing by Ian Geoghegan)