TOKYO (Reuters) - Two out of Japan’s three big power utilities projected a decline in electricity sales in the new business year as new entrants continue to grab market share following liberalization of the 8 trillion yen ($73 billion) retail power market two years ago.
Japan’s former 10 power monopolies have barely recovered from the 2011 Fukushima nuclear disaster, the resultant high fuel costs after most reactors were shut and costly safety upgrades. They now face an exodus of customers with Japan’s retail market thrown open to hundreds of firms.
Tokyo Electric Power (Tepco) (9501.T), Kansai Electric Power (9503.T) and Chubu Electric Power (9503.T) have lost some 5.7 million retail power customers who have switched to new electricity providers since the sector was fully liberalised in April 2016.
Though the power utilitiies are trying to offset the losses by winning new customers outside their home turf, they are having a hard time halting the decline in overall power sales.
Top-ranked Tepco projected group power sales to fall 2.9 percent in 2018/19, after posting a 1.4 percent drop in the year ended March 31.
“The competition in the (Tokyo) Metropolitan area is very severe,” Tepco Holdings President Tomoaki Kobayakawa told reporters when asked about the decline in power sales.
Kansai Electric posted a steep 5.1 percent decline in power sales in 2017/18 but did not make projections for the new year. Chubu Electric was the only one among the top three power utilities to post a 0.9 percent gain in group power sales in 2017/18, but projected a 1.8 percent decline in the new business year.
The three utilities this week posted higher recurring profits in the year ended March 31 due to higher energy prices, but the decline in power sales has been weighing on profit.
Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities, has said that though the power utilities do not report details about the adverse impact on earnings from the customer losses, the impact should not be minimal.
To offset declining power sales, many of Japanese power utilities have entered the 2.4 trillion yen retail city gas market that were opened up for competition a year ago and selling power outside their home turfs.
($1 = 109.3300 yen)
Reporting by Osamu Tsukimori, Editing by William Maclean