Improper Behavior Threatens Foundation of Electricity Market Liberalization

Editorial

16:18 JST, January 30, 2023

It has been discovered that employees at six major electric companies improperly accessed information about clients of new entrants to the electric market via the major firms’ subsidiaries for transmission and distribution. This is a heinous act that undermines a fair competitive environment and should not be tolerated.

At Kansai Electric Power Co., 730 employees in the retail division reportedly looked through more than 14,000 pieces of client data of the new entrants — so-called power producers and suppliers (PPS) — during a three-month period to December last year via an operational system that KEPCO shares with its transmission and distribution subsidiary.

In some cases, they used the information for marketing activities to obtain new contracts.　

Transmission and distribution subsidiaries are responsible for supplying households and businesses with electricity from power plants. Following the liberalization of the electricity retail market, they were spun off from the major electric power companies. These subsidiaries lease transmission lines to the PPS and also manage the data of PPS subscribers, such as their names, addresses and electricity usage.

The Electricity Business Law prohibits major power companies’ retail divisions from having client data shared with their transmission and distribution subsidiaries to prevent the parent companies’ usage of the data in marketing activities.

The practices at KEPCO are a clear violation of the law and trample on the regulations that form the basis of the liberalization of the electric power market.

It is appalling that more than 40% of the employees involved in the unauthorized access told an internal investigation that they were aware that such an act could constitute a problem under the law.

In addition to KEPCO, unauthorized access also took place at five other major electric companies — Tohoku Electric Power Co., Kyushu Electric Power Co., Shikoku Electric Power Co., Chubu Electric Power Co. and Chugoku Electric Power Co. The widespread disregard for laws and regulations in the electric power industry highlights an extremely serious situation.

To prevent recurrence of such incidents, these companies must take immediate measures, including modifying their systems to prevent unauthorized access.

The Electricity and Gas Market Surveillance Commission of the Economy, Trade and Industry Ministry has conducted an on-the-spot inspection of KEPCO and other companies based on the law. It is hoped that the ministry will clarify the situation and then impose strict measures such as business improvement orders.

Currently, all transmission and distribution companies are full subsidiaries of the major power companies. There have been doubts for some time as to whether fairness can be ensured.

In Britain, the capital ties between the major electric power companies and the transmission and distribution subsidiaries are said to have been cut. If information leaks like the recent case occur frequently, measures to enhance the independence of transmission and distribution subsidiaries will likely be an issue for consideration in Japan, too.

In the electric power industry, it came to light last year that KEPCO, Chugoku Electric, Chubu Electric and Kyushu Electric had formed a cartel in which they agreed not to operate in each other’s marketing areas to sell electric power for businesses.

Electricity rates are rising due to soaring fuel prices. Electricity users will not be satisfied with the situation if the liberalization of the electricity market continues to be disregarded. It is essential to root out misconduct and restore trust.

(From The Yomiuri Shimbun, Jan. 30, 2023)