Japanese utilities set for major separation of generation and transmission divisions

The Japanese Minister of Economy, Trade, and Industry Toshimitsu Motegi, last week told power companies to embrace the government-led reforms to the industry, as utilities brace themselves for significant changes in the market restructuring.

The first face-to-face meeting between an industry minister and top power industry officials since December 2010 came as the government gears up for a reform that encompasses separation of electricity generation and transmission operations.

A government panel on the reform recently reached an in-principle agreement to recommend that utilities separate their transmission divisions from generation by spinning them off as group firms.

The Ministry of Economy, Trade and Industry aims to include this plan in bills to be submitted for the upcoming ordinary Diet session.

“We will carry out a bold reform,” Motegi told Makoto Yagi, chairman of the Federation of Electric Power Companies of Japan, as well as top executives from more than 10 companies, including the president of Chubu Electric Power Co. 

“Excuses, such as that you cannot move forward or make decisions now because you have concerns, will be a problem” the minister added.

“We will cooperate positively, but it is impossible to determine now what will be the best way to separate power generation and transmission since we don’t have a clear nuclear power policy,” Yagi responded.

“Reform of the power sector is a major part of making progress on an energy policy that has the support of the people,” Motegi countered.

“Work will be done toward three major reforms — having transmission networks managed over wide areas; fully liberalizing power retailing; and boosting the efficiency of the power transmission sector further,” the minister said.

“There will be an announcement of the direction of reform and concrete details soon,” he added.