A number of steel manufacturers and other major corporations plan to venture into the business of generating and wholesaling electricity to electric power companies. These firms, which have run their own in-house generators until now, hope to put their experinces to work after the industry is deregulated in April this year. Like the United States and other countries of Europe where liberalization has paved the way for thriving operations by newcomers, Japan may soon see the rise of mini electricity supplies around the country.
Liberalization Plays a Key Role
Until now, the sale of electricity has been restricted to electric power companies with a license. In effect this gave nine regional power companies and one corporation specializing in electricity generation and wholesale a virtual stronghold on the market. In December 1995 the government changed the law as part of a package of deregulatory measures in the aim of exposing the industry to competition and bringing down prices for users. Under the revised law, any company with certain capabilities can supply electricity to electric power companies.
Interest Among Steel, Cement, and Oil Companies
Major steel makers with blast furnaces have shown the most interest in entering the market. They have advantage in already possessing the large tracts of land needed to build new generators and store fuel and the port facilities indispensable for importing fuel, so initial investments can be kept small. They also have the benefit of years of experience operating their own in-house generators.
Steel makers describe the lure of the industry as stable demand, which makes it easy to draw up plans, the industry's domestic orientation, which means that fluctuations in the foreign exchange market pose little risk, and the absence of foreign competition.
Other companies in the cement, oil refinery, chemicals, nonferrous metals, and paper-making industries with the land and facilities needed to get started also intend to launch operations. Given the widespread interest, a boom in the industry is expected to take shape soon.
Lower Prices Down the Road
The decision on which companies get contracts for supplying electricity to the power companies will be made through a system of bidding. The first round of bidding is scheduled for this summer, but it probably will not be until 1999 or so before the newcomers are able to produce a steady, sizable supply. In Britain, where the industry was liberalized in 1990, new suppliers now number more than 20, and together they have a 20 percent share of the market. If the number of such firms grows in Japan and their supply of electricity increases, competitive pricing may hit the industry as well.
(The above article, edited by Japan Echo Inc., is based on domestic Japanese news sources. It is offered for reference purposes and does not necessarily represent the policy or views of the Japanese Government.)