JAPAN Law and Practice Contributed by: Rintaro Hirano, Yutaro Fujimoto, Yurika Masakane and Yutaro Kato, Nagashima Ohno & Tsunematsu
In 2003, an electricity wholesale market, the Japan Electric Power Exchange (JEPX), was established to provide a liquid market of elec- tricity. In 2004, J-Power was privatised through being listed on the Tokyo Stock Exchange. The power industry also completed a series of structural reforms that began in 2013: • establishing a system to efficiently manage electricity across the transmission networks in Japan; • fully liberalising the retail sector; and • “legally unbundling” the transmission and distribution sectors from the generation and retail sectors. The Organisation for Cross-Regional Co-Ordina- tion of Transmission Operators (OCCTO) and the Electricity and Gas Market Surveillance Com- mission (EGC) were established in 2015 (see 1.5 Central Planning Authorities ). Subsequent to which, the retail sector was fully liberalised in 2016. However, as the major utilities and their affiliates still dominate the market, the existing basic electricity retail tariffs have continued to be regulated to secure fair competition with other retailers. This regulation is expected to be lifted at such time as the government considers that a sound competitive market has been established. “Legal unbundling” occurred in April 2020 when new rules were introduced prohibiting a trans- mission system operator (TSO) – except for Okinawa Electric Power Company, Inc – from operating an Electricity Generation Business (for the purpose of supplying electricity to retailers) or Electricity Retail Business (except for such business on certain isolated Japanese islands). Under this prohibition, TSOs are required to cre- ate a separate entity if they also want to conduct
an Electricity Generation Business or Electricity Retail Business within the group. Further, TSOs are prohibited from using information on electric- ity generators and customers for purposes other than their transmission and distribution business and are obliged to establish an information man- agement system. This new rule aims to secure the impartiality of the major utilities as operators of transmission and distribution networks so that every electricity retailer and electricity genera- tor may be given equal access to their networks under fair and equal conditions. In order to achieve this goal, new regulations were also promulgated to prevent the TSOs from exercising influence over the operations of their affiliate retailers. See 4.3 Terms and Conditions Imposed on Approvals to Construct and Oper- ate a Transmission Line and Associated Facili- ties . Further, in order to respond to new entrants’ needs after this structural reform, the govern- ment has established several new electricity markets: • the capacity market; • the long-term decarbonised power source auction; • the futures market; • the base-load market; • the balancing market; and • the non-fossil fuel energy certificates trading market. See 2.1 The Wholesale Electricity Market . Principal Laws The Electricity Business Act (Act No 170 of 1964, as amended) is the principal law governing elec- tricity business in Japan. Under this act there are seven types of regulated business, as follows.
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