Power sales decline for Japan's top utilities amid market liberalization

TOKYO (Reuters) - Japan’s three big power utilities reported another decline in electricity sales for the first half of the year as new entrants grab market share following liberalization of the 8 trillion yen ($71 billion) retail power market a year and a half ago.

Men work around an electric utility pole along the street in Urayasu, east of Tokyo October 9, 2014. REUTERS/Issei Kato

More than 5.1 million retail power accounts, or about 8 percent of total in Japan, have switched to new power providers in Japan by end-September, data by the national grid monitor OCCTO showed.

The overall share of power sales by new power entrants has more than doubled to over 12 percent since full market liberalization in April 2016.

Japan’s top 10 utilities - having barely recovered from the Fukushima nuclear disaster of 2011, the resultant high fuel costs after most reactors were shut and costly safety upgrades - are now facing an exodus of their customers with Japan’s retail market thrown open to more than 350 firms.

Japan’s top three firms Tokyo Electric Power Co (Tepco), Kansai Electric Power and Chubu Electric Power said their power sales fell by 3.8 percent, 7.3 percent and 0.8 percent, respectively.

Though all 10 former regional power monopolies reported a gain in revenues in the first half ended September due to higher energy prices, the decline in power sales is weighing on profit.

Eight of them reported declines in recurring profits in April-September, with No.2 power seller Chubu Electric posting a 46.6 percent decline on year.

Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities, said that though the power utilities do not report the details on the adverse impact to earnings from the customer losses, the impact should not be minimal.

“Power sales for the high profit-margin retail accounts have been down, so that should work as a factor for profit decline,” he said.

He added that Kansai Electric, which reported a recurring profit of around 158 billion yen for the six months ended Sept. 30, could have seen its profit decline by around 10 billion yen during the period, adding the profit drop for the full year could be about double that.

To offset declining power sales, Tepco has been trying to limit the impact by entering the 2.4 trillion yen retail city gas market that were opened up for competition in April and selling power outside its home turf, Tepco Holdings Managing Executive Officer Yoshihito Morishita said.

Reporting by Osamu Tsukimori, editing by David Evans