TOKYO Nov 13 Japan's upper house passed
legislation on Wednesday to start the most ambitious reform of
its electricity sector since 1951, a process prompted by the
Fukushima nuclear crisis that may end with the break-up of
powerful regional monopolies.
The reforms, including the establishment of a national grid
and the liberalisation of the power market for homes, are
central to Prime Minister Shinzo Abe's drive to overhaul the
economy, as high energy costs threaten to derail efforts to
reverse decades of stagnation.
Regional monopolies, including Tokyo Electric Power Co
and Kansai Electric Power Co, supply almost 98
percent of Japan's electricity and terms for access to their
transmission lines make it onerous for new entrants.
Wrenching control of transmission from the monopolies to
create a national grid became a big issue after the March 2011
earthquake and tsunami that sparked the Fukushima disaster and
highlighted an inability to transfer power to areas suffering
The power law was passed by Japan's lower house earlier this
month and sailed through the upper house with 202 votes in
favour and 29 against, a parliamentary official said by phone.
While the energy companies say they support the thrust of
the proposed changes, they have repeatedly urged the government
to give priority to stable power supplies and say reform should
be slowed down if this cannot be guaranteed.
The utilities have resisted attempts since the 1990s to
liberalise the industry. The companies and their affiliates have
ties with politicians, fund their campaigns and often give
government officials executive roles.
"There are quite a few issues to resolve," Makoto Yagi,
chairman of the Japan Federation of Power Companies and
president of Kansai Electric, said in a statement after the
"In the separation of power generation and transmission, in
particular, to ensure stable supplies, arrangements and rules to
supplement the split need to be in place," he said.
The monopolies were set up in 1951 during the American
occupation after World War Two and followed the U.S. model at
the time, with regional utilities controlling all aspects of
generation and transmission.
Tokyo Electric, which before the meltdowns at its Fukushima
Daiichi facility was the most powerful utility, is now under
government control and being split into separate units. That
process will probably be the template for broader change.
The legislation calls for the creation of a national grid
company in 2015.
"Ensuring high voltage transmission and distribution assets
are optimised across Japan rather than by individual monopolies
is key to delivering affordable electricity to Japanese
consumers and allowing access to a broad range of generation
assets including renewable energy," said Tom O'Sullivan, founder
of independent energy consultancy Mathyos Japan.
The government plans to liberalise the market for homes, an
important source of earnings for power companies, by 2016.
The market for customers using more than 50 kilowatts was
opened up in 2005 but utilities can still block supplies from
independent power producers as they control transmission lines.
The most ambitious phase of the reform envisages breaking
the monopolies into separate generation and transmission
companies by 2020 and abolishing price controls.
(Editing by Alan Raybould)