- YOMIURI EDITORIAL
Electricity market liberalization short-circuited by alleged cartels
13:19 JST, July 29, 2021
Major electric power companies in western and central Japan are suspected of forming a cartel to restrict competition. If this is true, the act runs counter to the purpose of the liberalization of the retail electricity market and is unacceptable.
In mid-July, the Fair Trade Commission conducted on-site inspections of Kyushu Electric Power Co. and its retail unit, as well as Kansai Electric Power Co. and Chugoku Electric Power Co., on suspicion of violating the Antimonopoly Law.
Regarding the sale of electricity to factories, office buildings and other businesses, the four companies allegedly agreed since around 2018 not to win customers beyond the service areas to which each utility firm had supplied electricity before the liberalization of the nation’s retail electricity market.
In April, the FTC also conducted a probe into Kansai Electric, Chugoku Electric, Chubu Electric Power Co. and Chubu Electric’s subsidiary on suspicion of violating the law. With the addition of Kyushu Electric, a cartel may have been formed over a wider area.
It would be malicious if they avoided price competition and secured profits by establishing separate “territories” as their sales areas.
In addition, regarding the sale of electricity and gas to households in the Chubu region, Chubu Electric and Toho Gas Co. are said to be suspected of forming a cartel to maintain prices, thereby disadvantaging consumers.
In the wake of World War II, each region long had its own monopoly on electricity supply. However, since about 20 years ago, retail sales of electricity have been gradually deregulated. The liberalization started with retail sales to large-scale customers, such as large factories, and in 2016, electricity retailing, including retail sales to households, was fully liberalized.
The liberalization of electricity retailing aims to encourage competition among utility firms to reduce electricity charges by expanding the number of new corporate power suppliers for each service area. It also has become possible for utility firms to supply electricity outside of their conventional service areas.
Under such circumstances, if cartelism runs rampant to avoid competition, liberalization would be hamstrung. Some observers believe that this is an organized effort involving executives of each company. The FTC needs to thoroughly investigate the matter, disclose the entire picture and take strict measures against any wrongdoing.
As liberalization of the retail electricity market has advanced, competition has intensified, with new power suppliers’ share of total electricity sales rising to about 20%. The surplus management funds of major electric power companies are said to have become insufficient as a result, and the necessary investment in power plants and power grids, among others, has not progressed.
But these circumstances do not justify their forming a cartel. A more reasonable approach would be for them to make efforts to reform inefficient operations that have been preserved under the monopoly system, and improve their profitability through such measures as reducing costs and creating new businesses.
Electricity charges have been on the rise against the background of the spread of renewable energy and high fuel prices. Each electric power company must thoroughly strive to provide consumers with the benefits of liberalization through sound competition, while ensuring a stable supply of electricity.
— The original Japanese article appeared in The Yomiuri Shimbun on July 29, 2021.
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