Public entity eyed for power supply

The Yomiuri Shimbun

The government is contemplating establishing a public entity to undertake the centralized management of electricity supplies, a move aimed at breaking utilities' long-standing monopolies in both the power generation and supply sectors, The Yomiuri Shimbun has learned.

The planned organization will be tasked by the government with controlling the transmission and distribution of power to ensure a stable power supply beyond regional service areas even in times of disaster, according to government and industrial sources.

The government plan may also encourage new entrants in the power generation business, potentially curbing utility rates by ending more than 60 years of monopolies in utilities' respective service areas, observers said.

The government, which has already launched behind-closed-doors moves to coordinate ideas with Tokyo Electric Power Co. and other utilities, plans to draft a reform plan late this month, the sources said.

The envisaged public entity will be modeled after the Independent System Operator (ISO) of the United States, the sources said.

The ISO covers a power grid that transmits electricity to points near consumption sites, substations that adjust voltage and other elements for use in households and factories.

These facilities, the sources said, will continue to be operated by each utility as they currently are.

The Japanese ISO will take full control of power supply, including allocating surplus power from some areas to those facing a risk of power shortages. It will also be empowered to decide on power transmission charges, a move observers expect will attract new participants to the power business--as happened in the United States, leading to an eventual reduction of electricity rates.

The government is studying a plan to loan personnel specializing in power supply management to the envisioned ISO. It also aims to establish a system under which existing utilities and newcomers can compete under the same conditions.

As a result, consumers will find it easier to select low-cost electricity, the observers said. Due to an expected collapse of monopolies in their service areas, the chances of trading power among power companies will increase, they added.

Under the new supply system, power shortages should become less likely even if a power plant is damaged in a disaster, the sources said.

In the aftermath of the Great East Japan Earthquake last year, the amount of power provided by utilities in western Japan for use in eastern Japan was extremely small due to the difference in power frequency between the two regions.

The frequency is 50 hertz in eastern Japan and 60 hertz for western Japan. Given the difference, the most likely plan is to establish an ISO in both regions to handle the centralized management of power transmission and distribution.

Eventually, the government plans to bolster power trade between the two regions to ensure stable supplies across the country.

A plan to divide the power generation business from the power supply business was raised in the early 2000s. But the plan failed due to opposition from utilities.

The government is considering placing TEPCO--the operator of the Fukushima No. 1 nuclear power plant crippled in the aftermath of the March 11 tsunami--under state control and separating its power supply activities from its generation business. With this as a stepping stone, the government plans to reform the management system of the entire power industry.

TEPCO has been left with no alternative but to accept the government plan to entrust power transmission and distribution to a public organization that can potentially lead to rate cuts, the observers said.