Deregulation of the Electric Power and Gas Markets
Deregulation

Meaning and Objectives of Electricity and Gas System Reforms and Schedule Milestones
4026

Deregulation
progress

Electricity

1995
2 million m3 or more
Large-scale factories andhospitals

62%%%

2,000kW or more
Large-scale factories, etc.

500kW or more
Medium-scale
factories, etc.

50kW or more
Small factories, etc.

1999

2004

2005

1 million m3 or more
Manufacturers and largescalecommercial facilities

500,000 m3 or more
Medium-scale factories,etc.

Establishment ofOrganization for Crossregional Cordinationof Transmission
Operators, Japan20072015

100,000 m3 or more
Small factories, etc.

Gas

49

Deregulation
progress%

53

57%

64%

%

Gas System Reforms

Tokyo Gas Group’s Actions

Since April 2017, regional monopolies and regulation on prices
for small-scale gas retail have been abolished. In the past,
general gas business operators provided a one-stop service
from production to supply and sales. The gas system reform has
separated the gas industry into three types: gas pipeline business(general and dedicated); gas retail business; and gas production
business. Retail operators (new entrants) are now able to use
the pipelines of the pipeline business operator, upon payment ofusage rates, and to sell gas to residential and small-scale businesscustomers.

In fiscal 2016, we made a good start by entering the electricity
retail business and getting prepared for the full deregulation of theretail gas business of April 2017, as a priority issue.

Small-lot segment

Tokyo Gas~2017.3

Production

SupplySales

2017.4~

Production

SupplySales

New entrants

Business Operators’ Major Roles, Major Changes from the Gas System Reform, and Tokyo Gas Group’s Strengths
Type of business

Major roles of eachbusiness operator

LNG terminal business (gas production business)[Notification system]

Production of gas, based on request from owncompany’s retail division and contracts with othercompanies

General gas pipeline business[License system]

Gas retail business[Registration system]

Transportation service for delivery to specified service
points via pipelines that the service provider maintains andoperates*1

Securing and supplying the supply capacity needed todeliver to own customers

Fair management as a pipeline operator available to all retailoperators
Last resort service obligation
Safety: emergency safety, inner-pipe leakage testing

2Major institutional
measures triggered
from the gas system
reformProvisions on the use of LNG terminal by thirdparties within the extent of excess capacity
Provisions to promote entry of various retail
operators

Safety: gas appliance inspection; safety awarenesspromotion
Retail gas business shift from a license system to aregistration system
Abolition of regional monopoly
Enabling all customers, large and small, select a retail
operator out of those with various services and rateschemes

1 The pipeline is commonly used by all retail operators.

Establishment of a fair retail competitive environment
and an appropriate gas pipeline network

3From rates based on the full cost principle to free pricesetting by retail operators*2
Realizing competition-driven decline in rates

Tokyo Gas Group’sStrengths

15

Stable and efficient terminal operation

Stable and reliable management of gas pipeline network

Community-based sales structure

Expansion of optimal new infrastructure to improve supply
capacity

Capacity to propose energy solutions

Emergency safety measures

LNG procurement capability of 14 million tons per year

After the phased and subsequent full deregulation of the electric power retail market in April
2016 and of the retail gas market in April 2017, Japan’s energy market has become fully
deregulated.

%

Full deregulation of theretail market

Securing a stable supply of electricity
Lowering electricity rates
Legal separation of thepower transmission anddistributions networks

Less than 50kW
Residential and small
commercial users

2016

2017

Expanding choices for customers

2020

2022

Less than 100,000 m3
Residential and small
commercial users

Meaning and Objectives of Gas
System Reforms

Legal separation of thegas pipeline network

Securing a stable supply of gas andincreasing its use

Full deregulation of theretail market

Lowering gas rates andhigher customer satisfaction

100

Expanding choices for customers andenhancing safety at customer sites%

Full deregulation of retail businessOverall Image after the Full
Deregulation of City Gas RetailBusiness
LNG
procurement

TOKYO GAS ANNUAL REPORT 2017

Meaning and Objectives ofElectricity System Reforms

100April 2017 and after

Previously deregulated area

LNG
terminal

Up to March 2017
Approx. 11 million residential and small
business customers*3

Large-lot customers of 100,000m3 and over

The pipeline network is usedby all retail operators.

12

The retail business shifted from alicense system to a registration system.
Regional monopoly was abolished.

3

Change from rates based on the full costprinciple to free price setting by retail
operators*2

Division of safety responsibility
Safety responsibility
Safetyregulation

Gas facilities

Gas appliances

Gas meter
Boundary ofproperty

Gasvalves

User’s site
Assetseparation

Gas appliance inspection and risk prevention publicity areidentified as responsibility of gas retail operators. As the existinggas operators have know-how in gas appliance inspection, newentrants should find it easy to entrust gas appliance inspection
and related operations to the existing operator. Meanwhile, thegas pipeline operator is responsible for emergency response
and inner-pipe leakage testing.
Safety responsibilities and responsible entity (Small–lot segment)

Business
operator

User
Gas pipeline operator

Gas retail operator

Inner-pipe leakage
testing

Gas applianceinspection, etc.

Safetyresponsibility

Emergency
maintenanceGas applianceinspection,risk prevention publicity General gas operator
Emergency response

Tokyo Gas

Inner-pipe leakage
testing

Gas retail operator
Tokyo Gas and new entrants

General gas pipeline operator
Tokyo GasBefore

After*1 “Transportation service” means to receive gas from the gas supply operator (who requests transportation service) in the pipeline of the gas operator and to supply the same amount at a different
spot through the same pipeline to the gas supply operator. The transportation rate is the pipeline usage rate that the gas retail operator uses in gas supply and is approved by the government.
*2 As a transitional measure so that the amendment would not result in increased gas retail prices due to insufficient competition with other gas retail operators, LP gas, all-electric operators andother players, the designated former general gas operator is required to provide retail price menus reviewed and approved by the Ministry of Economy, Trade and Industry (“METI”).
*3 Number of customers of Tokyo Gas

16