CHARACTERISTICS OF THE CITY GAS BUSINESS IN JAPANAs a result of its environmental friendliness and stable supply environment, natural gas is increasingly used
in a wide range of applications. In comparison with Europe and North America, natural gas still accounts
Tokyo Gas Co., Ltd. Annual Report 2009

Annual Report 2009for only a lower share of primary energy consumption in Japan. Accordingly, in the years ahead the relative

Tokyo Gas Co., Ltd.

growth potential of natural gas in comparison with other forms of energy is expected to be substantial.
In Japan, which is dependent on imports of LNG as the resource for city gas, pipeline networks areindependently installed in each area where LNG terminals are built, and city gas is produced, distributed,and sold through these systems. Pipeline networks are principally built in large urban areas with highpopulations, while in outlying regions, natural gas is supplied through such means as tanker trucks.

Topics: Overview of the gas rate adjustment system
Fluctuations in gas resource costs and residential gas rates at Tokyo Gas (example)
C (Mar.–May)
3 month moving average(¥/t)(¥/Month)Upperlimit 160%C (Aug.)

86,100B (Feb.–Apr.)
Standard averagegas resource cost

Upperlimit 160%
6,318

B (Jul.)A (Jan.–Mar.)A (Jun.)53,810

5,398

123

45678

9

monthAverage gas resource cost (left)
Standard residential gas rates at monthly usage volume of 34m3 (45MJ/m3) (right)
The portion of the fluctuation in gas resource costs that exceeds 160% of the standard average gas resource cost is
not subject to gas rate adjustment.

The price of LNG is significantly influenced by crude oil prices and exchange rate fluctuations. Consequently, the gas resource
costs borne by city gas suppliers are substantially influenced by changes in these areas. The gas rate adjustment system wasintroduced to promptly adjust gas rates1 to reflect such exogenous factors (gas resource cost fluctuations). The system is intended
to increase rate transparency and to clarify the efforts of suppliers to increase management efficiency.
Under this system, the impact of fluctuations in gas resource procurement costs on the revenues and expenditures of gas
companies is neutral over the medium to long term2.
1 In general, gas rates comprise the base rate + specific unit price (unit rate x gas usage volume), and under the gas rate adjustment system, fluctuations inresource costs are reflected in the unit rate component of gas rates by adjustment amount.
2 There is a time lag between the payment for gas resources and the reflection of the gas resource costs in gas rates. Consequently, in a single fiscal year,
there can be under-recovery or over-recovery in relation to gas resource costs stemming from fluctuations in crude oil prices and exchange rates.

The section inside this cover provides further details and explanation of gas rates as well as an explanation of the features ofSTABILITY ANDGROWTHINTEGRATION AND
EXPANSION ALONG
THE LNG VALUE CHAIN

Contents
01

Printed in Japan

Special Feature 1
Four Keys to theFuture Growth Potential of Tokyo Gas

06

Financial Highlights

07

Overview by Segment

08

To Our Shareholders and Investors
Special Feature 2
Tokyo Gas Group Medium–Term
Management Plan for FY2009–201313

1-5-20 Kaigan, Minato-ku, Tokyo 105-8527, Japan
http://www.tokyo-gas.co.jp/index_e.html
This report is printed on recycled paper from Tokyo Gas offices.

the Company’s business model.

20

Review of Operations
20 Gas Segment
27 Gas Appliances Sales Segment
Installation Work Segment
Real Estate Rental Segment
28 Other Business Segment
29 Technology Development

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Corporate Governance
CSR
FAQ
Financial Section
Consolidated Subsidiaries andEquity-Method Affiliates
Investor Information