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Liberalization Encourages New Tenders - International Law Office

International Law Office

Energy & Natural Resources - Japan

Liberalization Encourages New Tenders

July 16 2001

New Entrants
Tenders
Regulatory Developments


New Entrants

Since March two additional enterprises have registered as special-scale electricity utility supply business operators (SSEUSBO), bringing the total number of SSEUSBOs registered since the second stage of electricity liberalization was implemented on March 21 2000 to nine. The nine entities that have notified the Ministry of Economy, Trade and Industry to date (as required before commencing operations as a SSEUSBO under the amended Electricity Utilities Industry Law) are as follows:

Name of SSEUSBO (parent entity)
Location of Generation Plants (owners)
Capacity (kilowatts - kW)
Date of Ministry Notification
Diamond Power KK (Mitsubishi Corp)

Ibaragi Prefecture

Kanagawa Prefecture

Fukushima Prefecture

Mie Prefecture

35,000


20,000


4,800


122,300

June 19 2000

 



March 29 2001

Marubeni Corp Nagano Prefecture 32,200 August 4 2000
Asahi Glass Co, Ltd Fukuoka Prefecture (Asahi Glass Co, Ltd) 40,900 September 20 2000
E-Rex KK (Nihon Tanshi Co, Ltd) Miyazaki Prefecture (Asahi Chemical Industry Co, Ltd) 33,000 January 22 2001
Nippon Steel Corp

Fukuoka Prefecture (Asahi Glass Co, Ltd)

Shizuoka Prefecture (Toho Rayon Co, Ltd)

Shizuoka Prefecture (Asahi Kasei Co, Ltd)


19,000



8,000




4,000

January 26 2001
E Net KK (NTT Facilities, Tokyo Gas, Osaka Gas)


Niigata Prefecture

Chiba Prefecture

Kanagawa Prefecture

Osaka Prefecture


10,000


3,920


35,800


21,400

January 30 2001
Summit Energy KK (Sumitomo Corp & Sumitomo Kyodo Electric) Ehime Prefecture (Sumitomo Kyodo Electric) 50,000 February 9 2001
Daio Paper Corp Ehime Prefecture 506,110 March 22 2001
Sanix Inc Hokkaido Prefecture 74,000 April 9 2001

Tenders

The number of tenders by large-scale consumers (made possible in the second round of reforms to the Electricity Law) for electricity supply is increasing. However, a majority of the tenders have been won by the incumbent electric utilities (due to the still limited supply capacity of the new entrants, the incumbent utility has often been the only bidder), resulting in little reduction in electricity prices.

New entrants have won tenders for the supply of electricity to three facilities.

Location
Facility
Contract Electricity (kW)
Winning Company
Other Participants

Actual Price Reduction

Fukuoka City City Agency Building 3,100 Nippon Steel Corp Kyushu Electric and E Rex 15.3%
Chikushi Region Kyushu University 4,000 Nippon Steel Corp Kyushu Electric 8%
Kagoshima Prefecture Prefecture Agency Building 4,500 E Rex Kyushu Electric 21.5%

Nippon Steel and E Rex became the third and fourth new entrants to win an electricity tender after Diamond Power (the Ministry of Economy, Trade and Industry head office) and E Net (government building in Osaka City).

The tender process is having the desired effect of reducing some prices. However, new entrants do not have sufficient supply capacity to be able to enter into all tenders at this stage.

In response to the Tokyo harbour waste factory opting to put the sale of its surplus electricity to tender, three new entrants - Diamond Power, Nippon Steel and E Rex, and Tokyo Electric Power Company have decided to enter bids for the surplus electricity, marking the first tender for the sale of surplus electricity.

Regulatory Developments

A full review of the results of market liberalization is scheduled for 2003. In the meantime Enron announced proposals for the reform of the Japanese electricity market on May 15 2001. While the Ministry of Economy, Trade and Industry have initially adopted an open stance towards these proposals (which include the commercial break-up of generation, transmission and distribution sections of the existing utilities, the sale of generation assets of Electric Power Development Company (to be privatized in 2003), full liberalization of retail electricity supply and the development of an electricity pool that allows for bilateral financial trading), the response from the incumbent electric utilities has been defensive.


For further information on this topic please contact Paul Davis or Anne Hung at Baker & McKenzie GJBJ by telephone (+813 3403 5281) or by fax (+813 3479 4224) or by e-mail (paul.davis@bakernet.com or anne.hung@bakernet.com).


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