Deregulation of the Electric Powerand Gas Markets
Meaning and Objectives of Electricity and Gas System Reforms and Schedule Milestones
Deregulation progress

26 %

40 %

62 %

Electricity

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

500kW or more
Medium-scale factories, etc.

50kW or more
Small factories, etc.

1999

2004

2005

1995

scheduleGas

2 million m or more
Large-scale factories andhospitals

1 million m or more
Manufacturers and large-scalecommercial facilities

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

100,000 m3 or more
Small factories, etc.

49 %

53 %

57%

64 %

Deregulation progress

3Major issues in Gas System Reform
As a preparatory measure for full deregulation of theretail gas market, the regulatory authorities defined thegas industry as consisting of three types: pipeline
business (general and dedicated); retail business; andproduction business. As a general gas business in the
Greater Tokyo Area, Tokyo Gas has provided a one-stop

3

service from production to supply and sales. However,after the full market deregulation, retail operators(new entrants) will be able to use the pipelines of TokyoGas, upon payment of usage rates, and to sell gas tosmall-scale users.
The Tokyo Gas Group is preparing to address the full deregulation
as a priority issue and to ensure that it remains the preferredchoice of customers, by harnessing its unique strengths.

At present

After the full deregulation

No legal business restriction

Categories

Terminal
Section

Separated into
pipelinebusiness(general anddedicated);retail business;and production
business, as ameasure toprepare for thefull deregulationof the retail gas
marketGeneral gas
business
License system
Regional monopoly forsmall customersRate schedule is basedon the approved “fullcost principle”
Tokyo Gas

LNG terminals ofelectric powercompanies, etc.

Large-lot gas
business
Notification system
Large retail businessTrading companies, LPG
sales companies, etc.

1Terminal
SectionGas pipeline
business

Small-lot

LNG terminal business (gas production business)
Notification system

2Tokyo Gas, electric power companies, etc.

General gas
pipeline business

Dedicated gas
pipeline business

License system

Notification system

Tokyo Gas3
Gas retail businessElectric powercompanies, oilcompanies, etc.

Registration system

Gas appliances

Gas facilities

Gas appliances

MeterSiteborder

Siteborder

Gasvalves

Gasvalves

General gas operator

Regular checking
Emergency safety

User’s property site
Assetcategory

User

Safetyresponsibilities

Assetcategory

User’s property site

Safetyresponsibilities

Tokyo Gas andnew entrants

All users

MeterBusiness
operator

Electric powercompanies, oilcompanies, etc.

Notification system

Large-lotGas facilities

SafetyRegulations

2007

3

Business
operator

User
Gas pipeline business

Gas retail operator

Regular checking
Emergency safety

Safety responsibilities and responsible entity (Small–lot segment)
Emergency response
Inner-pipe leakage testing

General gas operator

Gas appliance inspection,risk prevention publicity

Tokyo GasTOKYO GAS ANNUAL REPORT 201615

General gas pipeline operator
Gas retail operator

Tokyo Gas

Tokyo Gas and new entrants4Deregulation

Meaning and Objectives ofElectricity System Reforms

100 %Full deregulation of theretail market

Establishment of anorganization for operating
Less than 50kW
wide-area electrical grid Residential and small commercial users

2015

2016

Securing a stable supply ofelectricity
Lowering electricity rates
Expanding choices for customersApril
Legal separation of the powertransmission and distributions networks

20172020
32022

Less than 100,000 m
Residential and small commercial users

Legal separation of the gas
pipeline network

Full deregulation of the retail market

April

100 %

Small-lot segment

Meaning and Objectives of Gas
System Reforms

Securing a stable supply of gas andincreasing its use
Lowering gas rates and higher
customer satisfaction
Expanding choices for customers
Enhancing safety at customer sites

Tokyo Gas

Before the full deregulation ofretail market

Production

SupplySales

After the full deregulation ofthe retail market

Production

SupplySales

Tokyo Gas
New entrants

New entrants

1LNG
terminalbusiness(gas productionbusiness)

Tokyo Gas Group’s Strengths

Ensure maintenance of LNG terminals and operate
stable gas production

Maintain conveyance rate structure based on thefull cost principle and ensure sufficient investment
for safety2General gas
pipeline
operators

From the perspective of expanding the use of naturalgas, general gas operators are encouraged to further
extend a pipeline network. From a perspective toincrease benefits of users (i.e., to lower conveyanceservice rates) through enhanced efficiency, the regulation
providing for rates to be based on the full cost principle
will be maintained for conveyance by general gas
operators (such as Tokyo Gas).

Tokyo Gas
Responsible for emergency safety of gas facilities
and gas appliances

Responsible for regular inspection of gas facilities
Accountability to customers with regard to various
conditions for retail sales, such as rates; costburden; measurement method of consumption
volume; calorific value, components, and pressureof gas; and maintenance responsibility.

3Gas retailoperators

4Safety responsibility such as gas applianceinspection and publicity to make known preventionof risk occurrenceTokyo Gas andnew entrants

Gas supply capacity to sufficiently satisfy demand

Relationship of trust with customers for 130 years since foundation and know-how in gas businessBusiness Operators’ Major Roles

Stable and efficient terminal operation
The Tokyo Gas Group manages 4 LNG terminals in a stable and efficientmanner, based on its abundant experience in managing LNG terminals andhigh-level LNG technology.

Stable and reliable management of gas pipeline networkBy accelerating to take measures such as for aged gas pipes, the groupaims at zero significant accidents and promotes more disaster-resilient safe
supply of gas.

Expand optimal new infrastructure to improve supply capacity
The Group decided to construct the Ibaraki Trunk Line that connects theIbaraki-Tochigi Trunk Line and Hitachi LNG Terminal with the ChibaKashima Line. Supply stability will be enhanced by having multiple pipeline
networks.

Emergency safety measures
Around 600 safety experts are assigned in 49 bases to ensure safe, stable,
affordable delivery of natural gas to approximately 11 million customers
around the clock for 365 days.

Community-based sales structure
The Tokyo Gas Group has more than 200 outlets (owned by Tokyo Gas
Lifeval, Enesta, and Enefit) in the Kanto Region and provide scrupulous
services to respond to needs of customers.

Capacity to propose energy solutions
Optimal energy solutions that combine gas, electricity, and added-value areproposed to customers.

LNG procurement capability of 14 million tons per year

(equivalent to approximately 15% of Japan’s procurement volume)
The Group is promoting more diversification in material suppliers, pricing
benchmarks, sales destinations, and other areas and will continue toflexibly collaborate with domestic and overseas players in LNG jointprocurement, accommodation, and sales.

16TOKYO GAS ANNUAL REPORT 2016