End of Kepco's monopoly?

August 23, 2015

Top-heavy, nuke-clinging Kepco faces liberated electricity market

http://www.japantimes.co.jp/news/2015/08/23/national/top-heavy-nuke-clinging-kepco-faces-liberated-electricity-market/#.VdozDJfwlLP

by Eric Johnston

Staff Writer

OSAKA – News that 7-Eleven stores in the Kansai region will trade Kansai Electric Power Co.’s electricity in favor of cheaper electricity from Tokyo Electric Power Co. has locals wondering if Kepco’s six-decade monopoly over Kansai’s electricity supply might be ending.

FromOctober, about 1,000 Seven-Eleven Japan Co. Ltd. stores in three Kansai prefectures will purchase their electricity from Tepco. The move comes just months after Kepco raised rates, and Seven-Eleven Japan, noting Tepco’s cheaper fees, made the move to switch utilities.

Stores in Nara, Wakayama and Hyogo prefectures will receive 32,000 kw of Tepco-provided electricity from a self-generator at the utility’s Kansai factory. That’s enough to power about 10,000 homes. For Seven-Eleven Japan, switching to Tepco means reduced electricity costs amounting to hundreds of millions of yen.

With deregulation in the smaller users electricity market set to begin next April, giving small businesses and residential customers a wider option of providers, Kepco seems particularly ill-placed to take advantage of the new competitive environment.

Prior to 2011, Kepco relied on nuclear power for up to half of its total electricity supply — the highest ratio of any utility in Japan. Because all 11 of its reactors remain idle, though two will be decommissioned, Kepco says it was forced to hike electricity rates in June to make up for lost revenues. But a host of critics, starting with Osaka Mayor Toru Hashimoto, have also noted that Kepco has done little to reduce its top-heavy management structure, especially the number of senior executives, all of whom command huge salaries and bonuses.

Adding to investor concerns is the fact that scare stories about how blackouts will occur without Kepco-provided nuclear power no longer resonate with the public. Thanks to a combination of voluntary reductions in electricity usage and ever more energy efficient technology, Japan as a whole is consuming over 10 percent less electricity now compared to 2010.

Even during the first week of August, when air conditioners were running full blast and temperatures topped 35 degrees, Kepco had plenty of electricity to sell, with demand under 90 percent, and as low as 80 percent, of available supply.

Nowadays, Kepco has changed tactics, and says the only way it can compete against Tepco and new electricity providers is to restart its nuclear plants so it can offer lower prices. But increased competition due to deregulatory measures, the introduction of more energy-efficient technologies like LED lighting, and shifting electricity consumption habits these past four years means Kepco will have to fight a lot harder to keep its old customers — let alone find new ones — in the coming years.