JAPAN Law and Practice Contributed by: Yutaro Fujimoto, Yurika Masakane, Hirokazu Tanaka and Yutaro Kato, Nagashima Ohno & Tsunematsu
4.2 Obtaining Approvals to Construct and Operate Transmission Lines and Associated Facilities Notwithstanding the general trend and significant gov- ernment activity towards liberalisation of the electricity market since 1995, the transmission and distribution network sector has seen the least structural change, and on an organisational level remains largely unal- tered. The ten major utilities continue their regional monopolies in their respective service areas for this sector. As METI’s position is to maintain these regional monopolies for the transmission and distribution sec- tor, it seems unlikely that METI would issue a new licence to conduct General Electricity Transmission and Distribution Business. There are, however, three exceptions to this monopoly. Electricity Transmission Business Licence Holders When the current licence regime was introduced, J-Power was the only electricity transmission business licence holder. At the time of writing, two more opera- tors have obtained an Electricity Transmission Busi- ness licence. They are expected to supplement the transmission services conducted by the TSOs within the respective monopoly regions of those operators by constructing transmission lines in areas that the existing transmission network does not cover and will not cover in the near future. To operate an Electricity Transmission Business requires the approval of METI. Specified Electricity Transmission and Distribution Business Licence Holders The transmission and distribution networks of Speci- fied Electricity Transmission and Distribution Busi- nesses have been constructed to serve consumers within a limited geographical area. As such, these networks are more akin to distribution networks than transmission networks in respect of length and capac- ity. As the impact that such networks may have on the transmission and distribution networks of General Electricity Transmission and Distribution Businesses is insignificant, Specified Electricity Transmission and Distribution Businesses can be conducted merely with notification to METI of certain basic facts regarding the services to be provided, such as geographical area of service, layout of transmission and distribu- tion lines, and the specifications thereof.
Electricity Distribution Business Licence Holders As described in 1.1 Law Governing the Structure and Ownership of the Power Industry , while General Elec- tricity Transmission and Distribution Business covers electricity distribution business in Japan, the 2022 Amendment allows a TSO to transfer or lease a part of its facilities in its service area to a DSO. The purpose of this new regulation is to enhance the efficiency of the power system, disperse power sources in some regions and improve power supply resilience. Local electricity companies, infrastructure companies and IT companies are expected to be DSOs. The regula- tions applicable to an Electricity Distribution Business are much the same as those applicable to a General Electricity Transmission and Distribution Business, since an Electricity Distribution Business is, in effect, an offshoot of a General Electricity Transmission and Distribution Business. The operation of an Electricity Distribution Business requires the approval of METI. Transmission Line and Associated Facilities A TSO is obliged to do the following pursuant to the Electricity Business Act and its delegated legislation: • offer access to the transmission and distribution networks located within its service area, and apply the terms and conditions (approved by METI) to all electricity business operators equally; • provide last-resort services; • provide electricity retail services on isolated islands within its service area; 4.3 Terms and Conditions Imposed on Approvals to Construct and Operate a • not allow its directors to assume an office in its parent holding company or any of its affiliates that operate an Electricity Retail Business or an Elec- tricity Generation Business (such parent holding company and affiliates being “interested parties”); • not to trade with interested parties except where permitted under the delegated legislation; • not to use proprietary information of electricity business operators or consumers for purposes other than its transmission and distribution busi - ness; • not to engage in discriminatory treatment; • install appropriate information protection;
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