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TOKYO (Reuters) - The Fukushima nuclear disaster is driving one of Japan's biggest industry overhauls since World War Two, as new, nimble suppliers take business from the big regional power monopolies, and manufacturers, from steelmakers to drinks firms, generate their own power and sell what they don't need.
The 10 powerful regional utilities, which still supply around 90 percent of Japan's electricity - even with the country's nuclear industry virtually idled since the 2011 disaster - are expected to be broken up into separate power generation and distribution companies anyway by 2020.
But the world's worst atomic crisis in a quarter of a century has accelerated the pace of market reforms, as a growing number of firms armed with new technologies, flexible payment options and, often, cheaper power invade traditional markets.
Tokyo Electric Power Co (Tepco), the operator of the Fukushima facility, and the other major utilities have lost thousands of accounts in the 30 months since the plant was crippled by a massive earthquake and tsunami, as businesses switch to cheaper alternatives, a Reuters survey shows.
"Until recently, everyone just assumed that if you put a plug in a socket electricity would come out. Most people had no idea of the structures behind that," said Hiroaki Ikebe, president of Ennet Corp, Japan's biggest independent electricity supplier. But the Fukushima disaster, he said, prompted people to ask how the power supply system works, how fees are calculated, what services are available, and how this compares with other countries.
While the big utilities still dominate the market, Fukushima exposed shortcomings in power distribution, and the increasing competition is likely to push prices lower and shrink their market share.
With energy companies' public image shredded in the wake of the Fukushima crisis, the government is to press on with opening up the market and reducing some of the highest electricity costs in the world. But change won't be easy as the utilities are politically well-connected and have resisted liberalization attempts since the 1990s.
The reforms, set to go to parliament when it resumes next month, aim to create a national grid company in 2015, and break up the monopolies into generation and transmission firms by 2020, and abolish price controls.
Ennet has doubled its customer base to 15,000 in two years by offering cheaper prices and more flexible contracts, overtaking Japan's smallest monopoly, Okinawa Electric Power Co, in terms of electricity supplied, Ikebe said.
The independents not only undercut the monopolies by accepting lower profit margins, they also provide power management systems and flexible buying plans to reduce prices and save energy. Many also trade electricity and use plant and infrastructure paid for by other firms, so they don't have to recoup those costs.
Tepco, Kansai Electric Power Co, Chubu Electric Power Co and the other regional monopolies have lost close to 18,000 customers since around the time of the Fukushima disaster, figures provided by the companies to Reuters show.
"We assume customers with smaller demand are likely to switch to the new electric power companies," said Naoko Iguchi, a spokeswoman at Kyushu Electric, which lost 340 accounts in April-June - more than double the number in the previous 12 months - as it raised tariffs to cover higher fuel costs while its nuclear reactors are shut down.
Tepco has been hardest hit, losing 11,550 customers as it raised its prices by 10-17 percent. That's more than half the number of accounts it has lost since 2000, when Japan last tried to open up the market to competition. With its only remaining viable nuclear plant - the Kashiwazaki Kariwa facility in Niigata prefecture - still shut, Tepco has said it may have to increase prices again to bolster its finances. The utility has racked up net losses of $27.4 billion since the Fukushima crisis 30 months ago.
A spokesman said Tepco offers energy savings plans to try to stop defections from its almost 29 million customers.
Chubu Electric last month broke an unwritten rule among utilities not to stray onto each others' turf by buying control of Diamond Power Corp, a Tokyo-based independent electricity supplier. Chubu Electric, Mitsubishi Corp, the seller of the Diamond Power stake, and Nippon Paper Industries Co will also build a coal-fired power station near Tokyo to supply Diamond Power.
Nippon Paper, Japan's No. 2 paper producer by sales, is also branching out on its own. It registered last year to be an independent electricity supplier to sell excess in-house generated power, spokesman Koji Yoshino said, and plans to build power generation facilities in its factories around Japan, including a 110 MW coal-fired plant in Miyagi prefecture, north of Tokyo. The company has used biomass and solar power in three other locations, Yoshino said.
Others have followed suit, with more than 100 companies registering with the government as of Friday to become power producers and suppliers. Manufacturers and others are also setting up in-house generators to produce electricity and cut costs as the big regional utilities hike prices - further eating into the monopolies' market share.
"We realize competition is going to get fierce," said a spokesman at Kansai Electric, which this year raised its prices by almost 10 percent, and lost 1,050 customers in May-July.
The number of locations licensed to generate 1 MW or more of in-house power rose 4.6 percent to 3,346 in the year to end-March 31, industry ministry figures show, with manufacturers from steelmakers to drinks firms getting in on the act.
Asahi Group Holdings Ltd, Japan's second-biggest beverage maker by sales, spent about 1 billion yen ($10 million)to add a 7.8 MW gas co-generation unit at its Ibaraki brewery - inside Tepco's service area - that started in July. That, and other energy saving measures, will allow it to cut peak-time energy use across its eight breweries by about 40 percent compared to last summer, Asahi said.
Kobe Steel Ltd, which generates power at its factories using blast furnace gas as fuel, has bigger plans. Japan's No. 3 steelmaker aims to build Japan's biggest inland thermal power plant north of Tokyo, a 1,400 MW gas-fired station. The facility will be supplied by gas from an expanded network planned by Tokyo Gas Co, Japan's biggest city gas supplier and one of three shareholders of Ennet. The others are Osaka Gas Co and a unit of NTT Facilities Inc.
Additional reporting by James Topham, Osamu Tsukimori, Leng Cheng and Guo Cheng; Editing by Ian Geoghegan