391st Regular Research Session“ Current status and Evaluation ofElectricity market liberalization in Japan,
USA and Europe “May, 19, 2005
Junichi Ogasawara, Group Leader
Electricity, Nuclear & Coal Group, Industry Research Unit
1

IEEJ:August 2005

Contents of the Report
1.
2.
3.
4.
5.
6.

Background and whole picture
Comparison of liberalization model
Status of price gap between Japan and foreign countries
Customer choice switch rates
Reliability of power grid system
Summary* This study is based on the 2004 contract research, “Evolutionary status and
Evaluation of Electricity and Gas Market Liberalization (Comparisons between
Japan, USA and Europe)” from the Comprehensive Energy Promotion
Committee.

2

IEEJ:August 2005

1. Background and whole picture(1) Background of the issue
Industry Law

Electricity Industry

Gas Industry

1995’samendmentz Introduction of IPP (Independent
Generators). enhance flexibility of
selective tariffs, introduction ofyard stick evaluation and others.

z Liberalization of large scale supply (over 2 megam3), delivery system, introduction of yard stickassessment

1999’samendmentz Retail partial liberalization,
introduction of PPS (Power
Producers and Suppliers) ,introduction of reporting system attariff rate down case, abolition ofregulation on side business andothers.

z General gas business: Range of big supply was
expanded to 1 million m3. Review of regulation
on new entry into community gas business.
Abolition of regulation on side business.
z Community gas business: Price liberalization forparticular large supply (more than 1 thousand
m3 of annual contract). Abolition of local gas
adjustment association.

2003’samendmentz Expansion of retail partial
liberalization scope, establishmentof neutral system organization andpower exchange, abolition oftransfer charge and others.

z Range of big supply was expanded to a half
million m3. Utilization of the third party innegotiation for LNG stock yard. Foundation ofgas pipeline company. Community gas company
came to be able to use natural gas.

After 10 years from the start of electricity and gas reform in Japan, how is theregulatory reform evaluated?
3

IEEJ:August 2005

1. Background and whole picture(2) Whole picture
Chapter 1 Analysis and evaluation ofliberalization of electricity and gas market
in Europe and America

Chapter 2 Analysis and evaluation ofliberalization of electricity and gas
market in Japan.
Liberalization process

USA

UK

FranceGermany

Undertake of benchmarking inEuropeStudy ofevaluation method

Extraction ofliberalization
model
Grasping present
status of issue

Status of retailcompetition
Degree of efficiency
enhancement

Chapter 3 Current status and evaluationof liberalization in electricity and gas
marketPositioning of liberalization
system of Japan at internationallevel
International comparison withevaluation index• Price level• Custmer choice switch rate
Reliability related index•

Problem and prospect

Chapter 4 Summary

Extraction ofliberalization
model
Grasping present
status of issue

z The fiscal year 2004 contract
research from the Committee forEnergy Policy Promotion,“Current status and Evaluation ofElectricity and Gas Market
Liberalization (Comparisons
between Japan, USA and Europe)”
was carried out.
z Comparison of liberalization
scheme, comparison of price levelas a measure of efficiency,
customer choice switch rates as ameasure of competition
development, and reliability index
as reliable supply were reviewed
for the status of Japan, USA andEurope.

*This report is an evaluation at the time of theend of March 2005, and is not for after the
new system.
42. Comparison of liberalization model(1) Comparison of liberalization model among Japan, USA and Europe
Federal reform for power generation and transmission sector

Private electriccompany

Connection line

Generationcompany(owned by
distribution company)

Generationcompany

Generationcompany(owned by
distribution company))

Generationcompany

Generationcompany

Private electriccompany• Regulation reform started from the beginning of
1990s in UK, Norway and others.
• Through 1996 EU electricity directive and 2003 EU
new electricity directive, unification of regulations
for member countries is going on aiming for the
single electricity market.

New
entranceNew
entrance

Local distribution
company

RTO
Local distribution
company(owned by
distribution company)

Generationcompany*Functional separation and wide area operation(+establishment of energy market)

Transmission
company

Regional
distribution
company
Retailcompany

Local distribution
company

Local distribution
companyNewentrance

Retailcompany

Regional
distribution
company

Interconnection line

Local distribution
company

Transmission
company

Legal unbundling of national
electric company

Local distribution
company

Legal unbundling of national
electric company

GeneratingcompanyNewentrance

Generationcompany

Generationcompany

Generatingcompany(owned by
distribution company)

EU’s single energy market concept

Structural reform of the state• The third party access to transmission facilities
was begun by 1996 order 888/889. 1999 RTO
order and others.
• State regulation reform was carried out innortheastern area from the 1997 Rhode Island. 5

2. Comparison of liberalization model(1) Comparison of liberalization model among Japan, USA and Europe
EU

USA

Japan

The year ofliberalization
startElectricity regulation reform of
EU-wide started in 1996,
according to EU Electricity
directive. The enforcement
time of regulatory reform wasvarious depending on the
country. (liberalization of UK
started in 1990)

Reform of generation andtransmission sectors started
following order 888 in 1996.
The other sectors were carriedout separately by the state.
(partial liberalization wasstarted at Rhode island in
1997.)Overall reform of electricity
industry was started according torevision of Electric Utility Industry
Law in 1995. Retail liberalization
was started March 2000,
according to 1999’s revision ofElectric Utility Industry Law.

Main purposeof system
reformRealization of single market
following EU economic
integration

Correction of electricity pricegap among the states

Correction of gap between
domestic and foreign price

Framework ofwholesalemarketNo regulation in all EU. But,
most of countries have power
exchange.

RTO founded mandatory
energy market within its area.
(so to speak “pool market”)

Japan electric power exchange(JEPX), a non-mandatory typeexchange, started operation from
April 2005.

Unbundling oftransmission
sectorFunctional and accounting
unbundling were obliged by
1996 EU directive. The legal
and functional unbundlingwere obliged by 2003 EU
directive.

Functional and accounting
unbundling were requested by
1996 order, however a wide
area transmission organization
RTO was proposed by 1999
order 2000. The northeastern
PJM ISO, Midwest ISO areapproved as RTO.

The accounting unbundling andinformation isolation were obliged
by the 1999 amendment of theElectricity Utility Industry Law.
The enforcement of regulation on
action was carried out by the2003 amendment.

Scope ofretailliberalization

Full liberalization is obliged tostart by 2007. Especially, UK
and Germany has alreadystarted full liberalization.

There is no unified movement
at Federal level. Fullliberalization was carried out inthe most states of thenortheastern area. The
southeastern area is notliberalized.

Liberalization was carried out forhigh or more voltage consumers
April 2005. The discussion on thereview of system including
appropriateness of full
liberalization is scheduled to startin 2007.

6

2. Comparison of liberalization model(2) Evaluation of Japan’s regulation reform from the view point of Europe and America
Power
generation
marketPowertransmission
sectorRetail sector

regulation

EuropeUSA

Japan

necessarynecessary○

unnecessary

necessary×

Obligation of ensuring resources to supply for retail company

unnecessary

necessary×

Establishing of balancing market

necessarynecessary×

Establishing of ancillary service market

necessarynecessary

×

Unbundling of accounting

necessarynecessary○

Unbundling of decision making

necessarynecessary×

Legal unbundlingnecessary

unnecessary

×

Ownership unbundling

unnecessary

unnecessary×Establishing energy market

unnecessary

necessary×

Establishing of a wide area independent operator(RTO)

unnecessary

necessary×

Solution of pancake problem(*1)

necessarynecessary○

Reliability regulationnecessarynecessary○

Full liberalizationnecessary-×

Establishing of last resort service suppliernecessary--

Establishment of independent regulatory authority

necessary(*2)

necessary

×

4/11

4/12

Establishing of Power Exchange (including mandatory energy market)
Adoption of LMP method

Number of circles from each assessment axis
*1*2“Pancake problem” means a special charge which is assigned to wide area trade, for example in Japan, the transfer
charge crossover multiple general utilities supply areas is that. (It was decided with 2003’s amendment of Electricity
Utility Industry Law to be abolished by April 2005.)
The independent regulatory authority mentioned here is the one which is obliged to establish for each country
government. It doses not mean that the authority is independent from decision making of competitive policy in EU’s
overall energy policy.

7

IEEJ:August 2005

2. Comparison of liberalization model(3) Relation between Electricity regulation reform and political goals
EU

USA

Japan

Promotion ofefficiency raise

Under the concept of EU single energy market,
through liberalization of retail market and regulationof transmission sector, the enhancement ofefficiency is promoted. Reliability rule is being
made by mainly UCTE, which constrainstransmission company.

Efficiency enhancement is
promoted through liberalization ofwholesale market and regulationof transmission sector. Treatmentof retail sector is different
depending on the states.

Compatibility of efficiency
enhancement throughcompetition and other politicalproblems is aimed in the base ofcompetitive situations.

Maintaining of
reliability of power
grid system

Under the concept of EU single energy market,
through liberalization of retail market and regulationof transmission sector, the enhancement ofefficiency is promoted. Reliability rule is being
made by mainly UCTE, which constrainstransmission company.

NERC is carrying out review ofreliability regulation, in
accordance with variety ofbusiness form. Comprehensive
Energy Law Draft will be able togive legal obligation.

Electricity system utilization
association made theassociation rule, as a volunteer
rule . Dispute resolution was
carried out with it.

Energy security

Requesting a EU consistent electricity regulation
reform to surrounding countries, energy
transportation from a energy resource country.
Additionally, dialogue to a energy resource country
has been carried out.

No relation to Electricity
Regulation Reform. No relation toElectricity Regulation Reform.

Global environment
issue

There is no apparent relation to Electricity
Regulation Reform, however a retail company has
the obligation to publish CO2 unit production perelectricity sales (labeling). Government assigns andensures the final guarantee supplier.

No relation to Electricity
Regulation Reform. No relation toElectricity Regulation Reform.

General electric companies are
expected to promote the longterm fixed power source
development, as nuclear power
generation and others, still
under the generation andtransmission combine system.

Universal service

There is no apparent relation to Electricity
Regulation Reform, however a retail company has
the obligation to publish CO2 unit production perelectricity sales (labeling). Government assigns andensures the final guarantee supplier.

State government assigns the final
guarantee supplier, and assure it.
The situation depends on the state.

** General electric company has supply duty for small scale consumer.

Japan has more restrictions based on energy security or global environmental problem than
Europe and America.

8

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(1) preconditions
Home use

Middlescale,
businessLarge
scale,
business

Ultra large
scale,
business

Consumer
image

Commonhome

Smallworks,
supermarket, smallbuilding

Middleworks,
supermarket, smallbuilding

Large
works,
hotel ordepartment
store

TXU

Receiving
voltage

100V or200V

6,000V

6,000V

20,000V

LondonElectricity(LE Group)

LE

30A

150kW

1,000kW4,000kW

UnitedKingdom

PowerGen(E.on)

PG

Use
magnitude(contract
power etc)

Germany

RWE

RWE

Consumed
power

3,480kWh(annual)396,000
kWh(annual)4 millionkWh(annual)16 million
kWh(annual)France

EDF

EDF

Japan

Tokyo ElectricCompany

TEPCO

Calculation period

Jan.2004 to
Dec.2004

Same asthe left

Same asthe left

Same asthe left

Exchangerate

1=109yen,
1pound=19
8yen,
1euro=135
yenSame asthe left

Same asthe left

Same asthe left

Nation or
regionName of electriccompany

Abbreviation

New York
USA

Consolidated
EdisonConEd

Illinois
USA

Commonwealth
Edison(Exelon)

ComEd

Texas
USA

TXU Energy(Texas Utilities)

UnitedKingdom

9

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(2) home use (in 2004)
yen/kW
30
25

27.5
basic pricetax and others
22.1

energy price

21.5
19.9

20
14.5

15

15.3

13.9

13.4

ComEd

TXU
(USA)

10
5
0
TEPCO

EDF
(France)

RWE(Germany)

PG
(UK)

LE
(UK)

ConEd
(USA)

(USA)

10

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(3) middle scale use (in 2004)
yen/kW20

18.0

basic pricetax and others

15.1

14
12

18.4

16.8

18
16

energy price

12.3

12.1

PG
(UK)

LE
(UK)

12.7
11.5

9.8

10
8
6
4
2
0
TEPCO TEPCO
EDF
RWE(Industrial) (Business) (France) (Germany)

ConEd
(USA)

ComEd
(USA)

TXU
(USA)

Note: electricity price of EDF does not include tax and others.
11

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(4) large scale use (in 2004)
yen/kWh18
15.8

basic pricetax and others

energy price
15.0

16
13.9
13.0

14
12

10.0

10.1

PG
(UK)

LE
(UK)

10
8

9.5

9.9

ComEd
(USA)

TXU
(USA)

6.3

6
4
2
0
TEPCO TEPCO
EDF
RWE(Industrial) (Business) (France) (Germany)

ConEd
(USA)

Note: electricity price of EDF does not include tax and others.
12

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(5) ultra large scale use (in 2004)
yen/kWhbasic pricetax and others

18

13.4

12

10.8

10
8

16.2

15.2

16
14

energy price

10.2
8.1

8.3
7.1

6.2

6
4
2
0
TEPCO TEPCO
EDF
RWE(Industrial) (Business) (France) (Germany)

PG
(UK)

LE
(UK)

ConEd
(USA)

ComEd
(USA)

TXU
(USA)

Note: electricity price of EDF does not include tax and others.
13

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(6) summary of comparison (in 2004)
EDF(France)

RWE(Germany)

PG
(UK)

LE
(UK)

ConEd
(NY, USA)

ComEd(IL, USA)

TXU(TX, USA)

1.11

0.81

1.53

1.45

1.03

1.59

1.66

business

1.83*

1.07

1.46

1.49

0.98

1.56

1.42

Industry

1.53*

0.90

1.22

1.24

0.82

1.31

1.19

business

2.52*

1.22

1.58

1.57

1.05

1.66

1.60

Industry

2.21*

1.07

1.39

1.37

0.92

1.46

1.40

business

2.47*

1.41

1.88

1.84

0.94

1.49

2.16

Industry

2.17*

1.24

1.65

1.61

0.83

1.31

1.90

Home
Middle
scale
Large
scale
Ultra-large
scale
*1
*2

EDF electricity price does not include tax and others, excluding home use.
Numeric numbers indicate the ratio of Japan’s electricity price assumed the price of each company to beunity.

In comparison with the representative electric company of France, Germany, UK and USA,electricity price of Japan is approaching to the level of these countries.
In comparison with New York area, Japan’s price is realized to be equal or low level of it.
14

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(7) Change of electricity price : USAcent/kWh13

Pennsylvania

Carifornia, Massachusetts,

New York

Texas[Start year of liberalization]

12
11

California
Massachusetts
New York
Pennsylvania
Texas
FloridaTennessee

10
9
8
7
6
5
4
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Data origin: EIA

Price down was done at the beginning of structural reform and liberalization, afterward
electricity price tends to fluctuate largely.
15

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(8) Change of electricity price: Europe
Euro/1,000kWhEngland(1990)
Norway(1991)

210

Change of home use electricity price in Europe
SwedenSpain

Germany Italy

France190
Germany
Spain
France
Italy
SwedenEngland
Norway

170
150
130
110
90
70
50

1991
Data origin: Eurostat

1993

1995

1997

1999

2001

2003

Price in Spain is stably in falling down trend, in some countries, a large up and down fluctuation occurs.
16

IEEJ:August 2005

3. Status of price gap between Japan and foreign countries(9) Change of electricity price: Japan
start of sysytem reform

yen/1,000kcal
40

yen/kWh
20

start of retail liberalization

35-12.4%

30
low level of
1995-2003

25

18

industry
averagebusiness

16-24.3%-17.2%

20

14
12.83

15

12

-10.6%

10

10.66

10

5

9.98
-9.3%

0
1980 1983 1986 1989 1992 1995 1998 2001
crude oil

LNG

light

power

city gas

Data origin: Japan energy economics research institute, measure
analysis unit, “handbook of energy and economics statistics”

8
2000.2 2001.1 2001.4 2002.3 2003.2 2004.1
Year,quarter

Data origin: Ministry of Economics and Industry, “Survey of total
electric power demand”

After the 1995’s revision of Electric Utility Industries Law, general power electric companies continued torevise electricity price, and more than 20% of price down was realized, in comparison with 1995 price level.
(from TEPCO light and power revision rate)17

3. Status of price gap between Japan and foreign countries(10) Change of electricity price : comparison
Initial year ofliberalization(*1)

Price in initial year

Price in 2003

Changing rate

USA
EuropePennsylvania

1997

7.99 cent/kWh

7.98cent/kWh▲0.1%

California

1998

8.93 cent/kWh11.62 cent/kWh+30.2%

Massachusetts

1998

9.59 cent/kWh10.63cent/kWh+10.9%New York

1998

10.63cent/kWh12.44cent/kWh+17.0%

Texas

2001

7.39cent/kWh

7.50cent/kWh

+1.5%

UK

1990

7.42 pence/kWh7.76 pence/kWh+4.5%

Norway1991

38.9 ole/kWh54.8 ole/kWh+40.9%

Sweden(*2)

1992

67.5euro/MWh

83.8euro/MWh+24.1%

Spain

1994

105.9euro/MWh

87.2euro/MWh▲17.7%

Germany

1998

125.6euro/MWh

126.7euro/MWh

+0.9%

Italy

1999

157.0euro/MWh

144.9euro/MWh▲7.7%

France2000

92.8 euro/MWh

89.0euro/MWh

▲4.1%

1995

22.38 yen/kWh

19.05yen/kWh▲14.9%

Japan*1 The initial year means the year when structural reform regulations were put into effect, such as not only beginning of retailliberalization and implementation of pilot program.
*2 Only for Sweden, price in 1997 is used as price in initial year because of data limitations.

Data origin: USA; electric utilities average unit income price by EIA, UK; average credit buying price of standard
family (annual consumption of 3,300kWh) by DTI (tax included), Norway; home and agricultural
average unit price (added value tax excluded) by statistics authority, other European countries:
Eurosat data, Japan; general power electric company light power comprehensive unit prices.

18

4. Customer choice switch rates(1) USA: Status of the each state
State
Illinois

End of 2003

All consumer (*1)

Change
rate
16.4%

Main

November
2004
September
2004

All consumer

38%

All consumer
Home use

22.9%
3.1%
42.4%
26.5%
2.7%
39.3%

Maryland

Survey time

Objective consumer

Business & industry use

Massachusetts

September
2004

All consumer
Home use
Business & industry use

New Jersey

September
2004

All consumer
Home use
Business & industry use

New York

September
2004

All consumer
Home use
Business & industry use

Ohio (*2)

June 2004

All consumer
Home use
Business use
Business & industry use

Pennsylvania(*3)

October
2004

Texas

March 2004

Allegheny supply area
Duquesne supply area
PECO supply area
Penn Power supply area
PPL supply area
Home use
1st voltage receive (*4)
2nd voltage receive (*4)

Start year of liberalization
Home:02/05,business&ind
ustry:99/10,all:02/05
home:00/03, business &industry:00/03,all:00/03
Home:00/07, business &industry: 00/07,all:02/07

Base ofchange rate
MWh base
Number of
consumers
MW baseOutlineTransfer cost into home sector is not expensive.
New entries concentrate on ComEd Co. area.
All consumers are provided with Standard
Offer Service. High change rate in big user.
SOS is provided to user who does not choose
the new entry. High change rate in big user

Home:98/03, business &industry: 98/03,all:98/03

MWh base

Home:99/11, business &industry: 99/11,all:99/11

Number of
consumers

Home:98/05-01/07,
business & industry:
98/05-01/07,all:01/07

MWh base

Because of the incentive policy of retailcompetition like Backout Credit and bounty, thechange rate is high.

19.2%
18.7%
28.8%
18.9%

Home:01/01, business &industry: 01/01,all:01/01

MWh base

0.1%
33.7%
15.7%
0.3%
1.6%
15%
63%
46%

Home:99/01, business &industry: 99/01,all:99/01

MWh base

SOS is provided to user who does not choose
the new entry. The obligation to depress the
SOS price for home sector. The high change
rate of home sector is because of an active
aggregation service at local government level.
Competition promotion policy is carried out. For
example, Default Service is transferred to the
new entry with the Market Share Threshold:
MST.

Home:01/07, business &industry: 01/07,all:02/01

MWh base

0.28%
0.05%
1.87%
31.7%
7.2%
45.1%

SOS is provided as a transition measure, andDefault Service (DS) is provided as the final
guarantee service. The change rate greatly
varies depending on wholesale price trend.
The price of Basic Generation Services (BGS)
provided by local distribution company wasdepressed. The change rate is low.

Existing electric company provides at regulated
standard price (price-to-beat) till the market
share of new entry exceeds 40%.

*1 In Illinois, there is no new entry in home use consumer.
*2 The Customer choice switch rates in Ohio is the total of 8 regional public companies within the state.
*3 In Pennsylvania, only the number of users and the share for the new entry is published for each supply area.
*4 In Texas, 1st voltage receive means a user who receive standard transmission voltage and corresponds to mainly big user, and 2nd voltage receive meansa user who receive non-standard voltage and corresponds to mainly business or small industry user.
Data origin: Website of public business committee of each state

19

IEEJ:August 2005

4. Customer choice switch rates(1) USA: Example in PECO co. ltd. Pennsylvania
70%
60%
About 250 thousands ofhome consumers weretransferred to the New
Power co. by CDS.

50%
40%

MST was introduced tosmall businessconsumer
MST wasDecay of Enlon

30%

introduced tohome consumer

Home use
Business use
Industry use
Total

20%
10%
0%
99/04

00/04

01/04

02/04

03/04

04/04

05/04

Note: (Market Share Threshold Program): 20% of consumers who did not change supplier were randomly selected, then Default Service
supplier was decided by bid. PECO Energy’s business reform plan of 1998 said that if the supplier change rate of home and small
business consumers did not reach 50% by January 1 2003, the supplier for the consumers should be changed by bid. This open bid
was carried out based on the provision.
Data origin: Pennsylvania Office of Consumer Advocate, “Pennsylvania Electric Shopping Statistics”

20

4. Customer choice switch rates(2) Europe
Large scale adequate
consumer
ChangeChange inrate
2003
Austria
Belgium
Denmark
FinlandFranceGermany
GreeceIreland
Italy
Luxemburg
Netherlands
Portugal
Spain
SwedenUK
NorwayEstonia
LatviaLithuania
Poland
Czech

22%
35%
>50%
>50%
22%
35%
0%
>50%
30%
15%
10%
30%
9%
>50%
>50%
>50%
0%
0%
17%
10%
n.k.

7%
8%
22%
16%
n.k.
n.k.
0%
6%
n.k.
n.k.
n.k.
7%
5%
5%
n.k.
15%
0%
0%
17%
7%
n.k.

Slovakia
Hungary
Slovenia
Cyprus
Malta

10%
24%
10%
0%
0%

3%
19%
10%
0%
0%

Small business/home
consumer
ChangeChange in
rate
2003
3%
19%
5%
n.k.

1%
19%
5%
4%

6%

n.k.

1%

1%

35%
1%
0%
n.k.
>50%
>50%

n.k.
1%
0%
10%
22%
19%

4%

Retail supply market share
Number of
suppliers

Number of suppliers
independent from
DSO

Number of
Top 3 market
companies withshare
share of 5% more

Foreignmarket
share

144
41
69
70
20-25
1050
10
9
305
12
37
4
70
127
80
130
17
14
21
357
370

19
17
23
8
15
100
9
7
270
1
16
3
62
127
66
70
1
4
14
328
0

4
2
5
6
1
3
1
4
6
2
3
3
5
4
6
4
1
1
1
3
8

67%
90%
67%
30%
88%
50%
100%
88%
35%
100%
88%
99%
85%
70%
60%
44%
?
99%
100%(1)
32%
46%

2%
<10%
n.k.
25%
9%
20%
0%
12%
n.k.
0%
18%
33%
8%
39%
50%
2%
3%
0%
0%
17%
n.k.

25
26
76
1
1

21
20
71
0
0

4
7
6
1
1

84%
56%
71%
100%(1)
100%(1)

28%
97%
20%
0%
0%

Data origin: European committee,“Annual Report on the Implementation of the Gas and Electricity Internal Market TECHNICAL ANNEXES”, January 2005

21

IEEJ:August 2005

4. Customer choice switch rates(3) Japan: Trend in PPS share
share

milliion kWh

3.5%

3.19%

3.0%
2.5%
2.0%

PPS power sales
share (special high)share(500kW more)share(liberalization)
share(total)

600
2.30%

500
400

1.5%
1.0%

700

300
0.79%

0.5%

200
100

0.53%

0.0%
00/04 00/08 00/12 01/04 01/08 01/12 02/04 02/08 02/12 03/04 03/08 03/12 04/04 04/08 04/12

0

Data origin: Agency for National Resource and Energy, “Electric power total demand statistics”

Electric power sales and share of PPS is in an increasing trend, however it occupies only
2.30% of liberalization sector at the time of February 2005.

22

IEEJ:August 2005

4. Customer choice switch rates(3) Japan: Distribution of reported PPS
Actual consumer getting is mainly
for business use in metropolitan
area by TEPCO or KEPCO.

Oji paper 268MW

Reported supply source of PPS reached to
6.069 million kW at the time of March 2005.
Eneserve
585MW
Summit energy
Osaka gas
1397MW
62MW

Nippon Steel
211MW
Ennet
11302MW

Sanix 74MW

e-Rex
446MW

Fesco
110MW
Nippon oil
178 MWGTF institute 114MW
Daio paper 524MW

Idemitsu Kosan 60MW
Marubeni 735MW
Diamond power 618MW

Note: Reported power capacity of less than 10 thousands kW is omitted.

23

IEEJ:August 2005

4. Customer choice switch rates(4) Summary of comparative results

USA
In a competitive state, because the asymmetry regulation is introduced between
existing and new comer electric company, change rate is high.
On the contrary, in the state which make importance on returning profit ofliberalization to a small consumer including home, preceding price down has been
carried out and change rate is low.

EuropeIn UK or northern European countries, the situation is that the change rate of big
consumers is more than 50%. The change rate differs largely depending on
countries.
In the benchmarking report of European committee, as an index related to thedegree of competition development, market concentration index (number ofcompanies which have more than 5% share, share of top 3 companies), and sharein a foreign market are considered in comparison.

Japan
In Japan, an asymmetry regulation as in USA is not introduced.
The percentage of PPS getter is 2.30% and low among liberalization objective
consumers. If confined to Very-High, it remains 3.19%. (at the time of February
2005)
24

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability Organization: USA< NERC toal >maximum electric power: 788.48 million kW
summer supply capacity: 961.12 million kW
103.81 million kW

3,443 million kW

139.93million kW

56.99 million kW
98.49 million kW

53.57 million kW

4,037 million kW
40.48 million kW
153.11 million kW

60 million kW

581.24 million kW

z 3,084 of electric companies are joining, and small andlarge system operators are operating in 133 of system
control area.

z The USA’s security of Reliability of
power grid system is in the multiple
structure like that the NERC
administrates all of the northern
American system, under it a regionalreliability organization exists, andfurther, electric companies join inregional reliability association.
25

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability Organization: Framework of NERC

FERC
Good Utility
Practiceincludescompliance toreliability
criteria

Position
approval as
RTO

Framework ofmarket operation isestablished withcooperation withmember under theapproval of FERC.

< MAAC region >PJM
Interconnection

OATT

Operation company
Reliability Coordinator
Transmission Operator

Independency of top
decision maker isnecessary for rule making
and company certification.

Balancing Responsibility

Planning company

Certification

NERC

Planning Authority

First Energy

MAAC

Transmission Planner

ReportingRegional Reliability
Organization•••

The new Reliability Standard has been in valid since April 2005, but it is a re-construction ofexisting rules based on the Functional Model. Effectiveness of it will be secured by certifying
the organization which has the corresponding function, and providing compliance method.
26

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability Organization: Europe
European electric system is roughly divided
into the continental system (UCTE system),the northern European system (Nordel
system) and the UK system.
In the UCTE area, the frequency
control block is operated overmultiple countries, then the
responsibility system is in multiple
structure.
UCTE member< Outline of UCTE system >•TSO:34• Joining countries: 23 countries• Power generating capacity: 530 million kW• Electric power consumption: 2300 billion TWh

4

3

6

UCTE non-joining and association
Ireland and North-Ireland
Nordel (North Europe)UK
IPS/UPS Baltic countries
TurkeyNote: numeric number in the figure means the number of transmission company joining in UCTE within the country
Data origin: UCTE

27

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability Organization: Framework of UCTEFranceAs the adjustment of member
transmission company’s profit oreach country’s profit is necessary,the decision making method
reflected each features is adopted.

RTE

Regulation authority
Duty onstablesupply bybusinessregulation
Regulation au
authority
thority

Germany
EnBW Transportnetze AG
E.ON Netz GmbHRWE Transportnetz
Strom GmbH
Vattenfall Europe
Transmission GmbH

Spain
Regulation authority

Keeping accordancewith 2003 EU order,
each country has theright of interpretation.

REE

Adjustment

UCTE
Join

Only legally separated
transmission company(expected) joins.

•••
23 countries, 34 TSOs join.

Operational Handbook keeps aconstraint with the multiple
agreement in principle.
28

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability Organization: Framework of Electric Power Utilization Association

Regulation on business

Regulation authority

Assignment
Duty on stable supply+regulation on
actionGeneral electric company
Wholesale electriccompany

Adjustment, rule

Electric power
utilization
association

Private power generationcompany

Join

Particular scale electriccompany

It has two aspects of a business grouprole of providing service to membershipstakeholders, and widely keeping
fairness among system users. It keeps
the balance of decision making byconsidering neutral’s opinion.

System user
Neutral29

IEEJ:August 2005

5. Reliability of power grid system(1) Reliability organization:comparison of rules
Establishing Organization
Name of Regulation
MemberUSA
NERC

Europe
UCTE

Reliability Standards
Regional Reliability Association

Operation Handbook
Transmission Company

System Operation RuleO
O
Normal system operation ruleO
O
Emergency system operation ruleO
O
O
Transmission System Equipment Plan
Demand prospecting method
O
Criteria for equipment ensuringO
Wide-area adjustment ofO
equipments formation
Wide-area Trading MethodO
O
OO
Calculation Method for Available
Tranfer
Information Communication
O
O
Training of System Operator
O
O
Tree Management
O
Publication of InformationOO
Not clear, the function of transfer
Responsibility of electricity<reference> Legal Framework of
sector became various andtransfer company by Industry Law
Stable Power Supply
complicatedJapan
Electric Power System Council ofJapan (ESCJ)
Association rule
General Power Electric Utility,
Wholesale Generator, PPS,
Neutral parties
O
O
O

O
O
O

O
Responsibility of general powerelectricity company by Industry
Law

In USA, the responsibility for stable supply is assured in the distributed framework concentrating to the private
volunteer group NERC. In Japan and Europe, the responsibility for stable supply is assigned to particularcompanies by the industry law, but in Europe, a transmission company covers the role.
Considering the difference of the framework of stable supply, such as the industry law, the applicable function forJapan should be distinguished clearly.

30

5. Reliability of power grid system(2) Reliability assessment in USA: outline of assessment< outline of the supply capacity adequacy evaluation in each regional reliability association >
ECAR

ERCOT

FRCC

MAAC

MAIN

MAPP

NPCC

SERC

SPP

WECC

LOLE/LOLP

1day/10y
LOLE

1day/10y
LOLE

1day/10y
LOLP

1day/10y
LOLE

1day/10y
LOLE

1day/10y
LOLE

1day/10y
LOLE

1day/10y
LOLP-

Preparatory
necessity (nearmost)

Fulfill
LOLE

12.5%

15%

Calculateon LOLE
criteria
(PJM)

Next
summer14.
12% long
term16%15%

Fulfill
LOLE

Decidedfor eachsystemDifferent
for eachsystem

12%(9%
for systemhydro morethan 75%)-

Criteria setting/approval body
region
O

O1

O

O

O

O

O

O

Lower region

-

-

-

-

-

-

-

-

-

-2

O1

-

O

-

O

-

O3

-

-

O

O

O

O

O

O

O

O
O

O

O
O

-

O

O

-

O

Controlregion/separate
systemISO/RTO--

state/local
regulation authority
Evaluation term
corresponding year

O

1year

O

O

O

O

O

O

-

O

-

-

O

O

O

O

O

O

-

-

O

-

-

N/A

O

N/A

N/A

O

5years-More than10years

O
Evaluation implementation subject
regionLower regionO

separate system--

ISO/RTO

N/A

O

-

-

O

-

-

-

O

O

-

O

O

-

O

-

O

O

O

O
O

O

O

-

N/A

N/A

N/A

O

Note:

1. ERCOT is both for region and ISO.
2. A criteria does not exist in WECC, however criteria for supply adequacy is initiated in multiple lower area including California
and Northwest.
3. Only a part of region corresponds.
Data origin: Reproduced from NERC, ”Resource and Transmission Adequacy Recommendation”, June 15, 2004

31

5. Reliability of power grid system(2) Reliability assessment in USA: Prospect of supply capacity
Trend of the maximum electric power, generation
capacity and capacity margin in USA
GW

%

1,000
900
800
700
600
500
400
300
200
100
0

25

Prospect of the maximum electric power andpower generating capacity in USA

20
15
10
5
0
1994

1996

1998

2000

2002

capacity margin
maximum power
generation capacity(GW)
IPP generation capacity(GW)

New construction plan of power generating facility1998-2007(ratio to 1998’s capacity)

Note: capacity margin; the ratio of an excess supply overa demand to supply capacity
Data origin: NERC, EIA

z As the main increase of supply capacity rely on merchant power
generating company, the expectation of power supply capacity
is difficult.
z The short term (2004 to 2008) adequacy of supply capacity is atenough level in the North American scale, conditioned that the
new power generation facilities will be constructed asscheduled, however there still remains possibility that somelocal problems be caused by a high demand in unexpected badweather or related various facility problems.
z It is prospected that a new location of power generating may
cause local bias.

Data origin: NERC, “2004 Long-Term Reliability Assessment”, September, 2004

32

IEEJ:August 2005

5. Reliability of power grid system(2) Reliability assessment in USA:Prospect of transmission facility
Prospect of 230kVup transmission line construction (miles)
FRCC
MAAC
MAIN
MAAP-US
MAPP-Canada
NPCC-US
NPCC-Canada
SERC
SPP

6,894
7,057
6,195
14,705
6,660
6,406
28,961
28,868
7,659

Eastern system

129,844

WECC-UC
WECC-Canada
WECC-Mexico

58,40010,969563

Western system

69,932ERCOTsystem

360
134
374
228
94
376
258
1,349
191

Number of invoking level above 2

81
0
260
246
963
0
38
1,085
17

7,335
7,191
6,829
15,1797,717
6,782
29,25731,302
7,867

0.62%
0.19%
0.98%
0.32%
1.48%
0.57%
0.10%
0.81%
0.27%

6.4%
1.9%
10.2%
3.2%
15.9%
5.9%
1.0%
8.4%
2.7%

3,520

2,707

136,071

0.47%

4.8%

1,573
270
24

1,582
252
0

61,555
11,491
587

0.53%
0.47%
0.42%

5.4%
4.8%
4.3%

1,867

1,834

73,633

0.52%

5.3%

8,081

290

110

8,481

0.48%

4.9%

USA
CanadaMexico160,704
46,590
563

5,031
622
24

3,398
1,253
0

169,133
48,465
587

0.51%
0.40%
0.42%

5.2%
4.0%
4.3%

NERCtotal

207,857

5,677

4,651

218,185

0.49%

5.0%

times

300

250

200

150

100

50

0
Jan.
Data origin: NERC, “2004 Long-Term Reliability Assessment”, September, 2004

Mar.

May

July

2005

2004

2003

2000

1999

1998

Sep.
2002

Nov.
2001

Data origin: NERC, Transmission Loading Relief (TLR) Procedure,
http://www.nerc.com/~filez/Logs/index.html

33

5. Reliability of power grid%system(3) Reliability assessment in Europe: Prospect of supply capacity
Trend of maximum power, generation capacity and capacity margin in UCTE system
%
14

GW
600

12
10

500

8
6

300

100

4
2

100

0

0

GW
600

< January >

500
400
300
200

1999
gen. cap.

2000

2001

max p.

2002
spare p.

400
200
0
1999

2003
cap. Margin

%
14
12
10
8
6
4
2
0

< July >2000

gen. cap.

2001

max p.

2002
spare p.

2003
cap. Margin

The increase of maximum electric power is showing the later of 2% range in all of UCTE. The generation capacity is also in a similar level ofincrease, and the preparatory supply margin remains flat. In Europe, the regenerative energy occupies the large part of the generation capacity
increase, and it is a feature.

Prospect of maximum power and generation capacity in UCTE system
GW

GW
65
60

< January >6560< July >

55
50

55
50
45

45
40

40
2004

2005

2006

2007

2008

2009

2010

supply spare
5% of generation capacity + peak margin

2004

2005

2006

2007

2008

2009

2010

supply spare
5%of generation power capacity + peak margin

Data origin: UCTE, “UCTE System Adequacy Forecast 2005-2015”, January, 2005
No danger exist in the reliability of UCTE system in the period of 2005 to 2007. Sufficient increase of power generation capacity is expected, and the ratioof regenerative energy to newly constructed power generation facility is being enhanced. Considered those low availability, preparatory power decreases
from 2005 to 2007, but it is enough level in comparison with UCTE adequacy criteria margin. At the time of 2010, scheduled commissioning of power
plant compensates a part of demand increase, preparatory power continues to decrease. However, adequate security margin can be maintained.

34

5. Reliability of power grid system(3) Reliability assessment in Europe: Prospect of transmission facility
Busy occurrence in UCTE system international
connection line

UCTE regional block

4

6

5
1
3

2

Prospect on the increase of interblock connection line capacity
Cap. Inc.

periodUCTEmain region=Spain&Portugal+1200MW2007

Data origin: UCTE, “UCTE System Adequacy Forecast
2005-2015, January, 2005

UCT Emain region=Italy+800MW

2008

UCTEmain region = Italy+1600MW2010

In general, delivery capacity is not considered to
become a obstacle to system security. On the other
hand, based on the market phenomena that a power
station competes the most economic use, multiple
crowded points emerge in connection system, andbecause of this narrow path, the utilization of more
economic foreign power supply can become impossible.

Spain&Portugal=Morocco+400MW

2007

JIEL&Greece=Turkey+500MW

2010

Central= UCTE main region-

2007 - 2008

Central= Romania&Bulgaria

-

2000

Romania&Bulgaria =IPS/UPS+1100MW2009

Data origin: UCTE,”UCTE System Adequacy Forecast 20052015, January, 2005

35

IEEJ:August 2005

5. Reliability of power grid system(4) Reliability assessment in Japan< long term demand and supply balance evaluation >< short term demand and supply balance evaluation >Unit: 10MW

Unit:10MW

Demand and supply balance

Demand and supply balance

Item

5th year(2009)

10th year(2014)

AugustAugustMaximum power
demand (A)18,20019,246

Planned supply (B)19,838(B)/(A)

1.09

Item

1st year(2005)

2nd year(2006)

AugustAugustMaximum power
demand (A)17,34917,564

21,268Planned supply (B)19,415

19,555

1.11(B)/(A)

1.12

1.11

< reliability evaluation of connected system >(1)criteria of reliability: The reliability criteria of each connection system permits a partial power drop and a
supply difficulty, because no supply difficulty or generation difficulty can occur in principle for N-1 failure, andthe frequency is rare for N-2 failure.
(2)calculation cross section: As for calculation cross section, once a year by rule in principle, calculation iscarried out on multiple sections depending on facility utilization for each connection system.
(3)calculation result of operation capacity: Each connection system adopts the minimum of the limiting
values decided from thermal capacity, system stability, voltage stability, frequency maintenance.
36

IEEJ:August 2005

5. Reliability of power grid system(5) Summary of comparison results
USA
In the USA, NERC, the Reliability organization governing over all the North America,
systematically and regularly accomplish reliability evaluation. (the next year
(summer, winter), 10 years future)
Power source development relies on market, and construction of independent power
station increase, then the evaluation method has some change. Construction oftransmission facility is slow down in comparison with the power source development
prospect.
Because of local unevenness of power development, there can be power supply
shortage locally around in 2010.
EuropeReliability evaluation was carried out for the continental system by UCTE, and forthe northern Europe system by Nordel in Europe. Similar to the USA, power source
development is merchandised, and the construction of international connection line
inclines to get importance.
Japan
Reliability evaluation report was published by Power System Operation Association
in. It is evaluated that 2005 a sufficient supply capacity exists till 10 years future.
37

IEEJ:August 2005

6. Summary of evaluations from each index (1)View point of liberalization system design (international comparison of systems)
In Europe and America, in spite of the difference in direction of convergence ,each concept of “standard market design” is coming out. (However in the USA, it
is a concept of the reform for generation and transmission sector.)
From that point of view, the degree of achievement in Japan is concluded as low.
View point of efficiency (comparison of electricity prices)
In comparison with the representative electric utilities in France, Germany, Italy
and USA, Japan’s electricity price tends to approach them within a two times gap.
In comparison with New York area, it is almost in a equal or slightly low level.
In Europe and America, electricity price is varying after regulation reform, however
Japan’s electricity price is stably in falling trend.

38

IEEJ:August 2005

6. Summary of evaluations from each index (2)View point of competition development (customer choice switch rates)
The Customer choice switch rates to PPS remains at 2.34%, and very low inliberalization field.
In Europe, in the case that asymmetric regulation is introduced from the view pointof competition promotion, the supplier change rate is high, and in the other case,the rate is low.
View point of stable supply (reliability of power grid system index)
We should pay attention on that the framework of stable supply is largely unique ineach country, as in Japan, Europe and America. Depending on that, the positioningof reliability organization is different between countries, and Japan (ESCJ) can beconsidered as the intermediate between USA (NERC) and Europe (UCTE).
In Europe and America, power source development is relied on the market, and achange is occurring in framework of reliability evaluation. It is considered that the
supply capacity is enough for the present, however there is a possibility that a local
shortage of supply could occur because of uncertainty of new development.
Also in Japan, reliability evaluation report comes to be published by the powersystem utilization association, and it is evaluated that a enough supply capacity
exists in the next about 10 years.
39

IEEJ:August 2005

7. Problem and Prospect(1) Outline

Success of the new framework by revised Electric
Utilities Industry Law
Neutral Organization, Wholesale electric exchange

Security of Stable Supply
Maintaining long term balance of demand and supply
Positioning of adjustment power source

Expansion of retail liberalization

40

IEEJ:August 2005

7. Problem and Prospect(2) Neutral Organization, Wholesale electric exchange(i)The role of wholesale electricity exchange and neutral organization is important for thesmooth functioning of all Japan market founding.
• Before now, relation of generated power and demand was put importance, and theneeds of utilizing connection line for PPS was increased.
• By functioning of wholesale electricity exchange, dose any change occur inconnection line needs?
Hokkaido• Does the adjustment of connection line construction function in neutral(535)
organization (electricity system utilization association)?
Hokuhon connection line

Hokuriku

Echizen(551)
Minamireinan line
TohokuNishiharifukkouBT 60Hz 50Hz
about
(1,470)higashiokayama 200MWB
No margin
line&YamasakiSoma-futaba trunk line
about
about 200MW
tomogashira line
excess over 700MW
700M
Mie-higashiohmi line
about 1300MW*What kind of dispute can occur?
Kanmon connection line
about 1100MW

Kyushu(1,706)excess over
300MW

about 800MW

Chugoku(1,200)Kansai(3,306)excess over
1300MW

Honshi connection line
about 300MW

No margin

about
100MW

about 200MW

Chubu(2,750)excess over500MWAnami-kihoku direct
current trunk line FC No marginabout 40MW

Shikoku
(593)

Tokyo
(6,430)(After Higashishimizu FC
foundation about
200MW)*( ) is max power (unit :10MW):Frequency convert facility
about 200MW: AC-DC convert facility

Data origin: reproduced from 2004 supply plan41

7. Problem and Prospect(2) Neutral Organization, Exchange (ii): role of connection line•

In Europe and America, reliability organization(NERC&UCTE) has no adjustment function,
and a project is promoted through adjustment among individual companies.
USA

Europetransmission lineownerz Separate electric company (RTO&ISO z Possessed bydoes not possess transmission line)transmission company

Construction ofconnection line
Utilization ofconnection linez Separate consultation(RTO&ISO
study, electric company constructs)
z Direction for connection line beinternal transmission line, by RTO
expansion and unified market
z Use of connection line is in advanced
reserve systemz Priority use for owner, but the notused for the third party

Treatment ofspecial facility
Issues onconnection linez Separate consultationz Liberalization by divided
market system (usethrough spot market) ortransmission right market

z Priority use for owner,
but the not used for thethird partyz More difficulty of getting landz More difficulty of gettingland
z Complexity of licensing procedurez Complexity of licensingz System difference between regions
procedure(unclearness of income)z Complicated interest relations (owner, z System difference
between regions
operator, user each)(unclearness of income)Japan

z General andwholesale electriccompany (Japan
Power)z Adjustment between
related companies
z Advanced reserve
systemz Same as the otherconnection line
z More difficulty ofgetting landz In USA, the income from connection line tends to unstable, because that multiple connection is adopted, and the market different in each region.
Therefore, the construction of direct current connection line increased, because of stable expected income.
z In Europe, monopoly transmission company builds connection line in each country, then the construction of connection line is comparatively smooth.
For the establishment of unified European market, policy of increasing connection line is kept. (a leading company exists in each country) Partially, acountry expects for connection line as a measure of supply assurance, in which new power station construction is difficult.

42

IEEJ:August 2005

7. Problem and Prospect(3) Security of Stable Supply(i)kWdifferent shapepumped-up hydropumping
up power

PPS use power supply

nuclearconstruction target of 44,920MW by
2000, and 50,140MW by 2010 then57,980MW by 2030.

wind power etc
wind power : Installation
target of 3000MW at 2010

time

Concerning to thecountermeasures for energy
security and global environmental
problem, the promotion of nuclear
power and the spread of new
power source are considered as
the electric industries’ issue to beresolved.
However, as the ratio of such a
power source goes high, the ratioof adjustable power source, whichis requested to contribute tofrequency maintenance dependingon load change, is expected todecrease.

43

7. Problem and Prospect(3) Security of Stable Supply (ii)
10MW
28,00026,000new energy rate
nuclear ratio
maximum electlric power result
supply result
power generation capacity
preparatory rate

preparatory rate
45%
prospect40%

24,00035%
22,00030%
20,00018,00025%

16,00020%• After 1990, the growth ofdemand tends to slow
down.
• In this situation, theexpectation of demand insupply plan is getting todepressive yearly, then the
postpone of power source
development increases.
• According to 2005’s future
supply plan, the total shareof nuclear and new energy
will occupy 42% of all thegenerated power.

14,00015%
12,00010%
10,000
5%

8,000
6,000

0%
1975 1979 1983 1987 1991 1995 1999 2003 2007 2011

Data origin: reproduced from yearly supply plan

44

IEEJ:August 2005

7. Problem and Prospect(4) Expansion of retail liberalization
Based
Basedononthe
theelectric
electricpower
powersystemsystemofofthis
thistimetime, ,and
andconsidering
consideringassurance
assurancestatus
statusfor
forconsumers’
consumers’choicechoiceofof
option,option,after
afterconsidering
considering thethefollowing
followingissues
issueslike(i)like(i)assurance
assuranceofofReliability
Reliabilityofofpower
powergrid
gridsystem,(ii)energy
system,(ii)energy
security
andcompatibility
with
the
issue
of
environmental
preservation,(iii)
assuranceofthesecurity and compatibility with the issue of environmental preservation, (iii) assurance of thefinal
finalguarantee
guarantee
andtheuniversal
serviceand(iv)
practical
issues,itisappropriate
to
carry
out
full
scope
liberalization.
and the universal service and (iv) practical issues, it is appropriate to carry out full scope liberalization.As
As
the
time
to
begin
a
concrete
discussion,
becauseofthenecessityofjudgingthespreadstatusfor
supplier
the time to begin a concrete discussion, because of the necessity of judging the spread status for supplierchoicechoiceassociatedassociatedwith
withliberalization
liberalizationscope
scopeexpansion
expansionby
by(i)(i)ititisisreasonablereasonablethat
thatthethetarget
targettime
timeisisput
puton
on
April
2007,
2years
after
of
April
2005.
April 2007, 2years after of April 2005.
Data origin: Electric industries working group report, “desirable framework of electric industries system”, February 2003

The Customer choice switch rates in home sector is not always high in Europe andAmerica. However, the concept of “energy democracy” (power source constitution (equal
to the first energy source) the right to choose a supplier including CO2 production per unit)
Removing business regulation, is it reasonable to leave a partial monopoly permanently inretail market?
In any case, if full scope of liberalization is carried out, the change of framework as“general electric company”, can lead to a large scale regulation reform compared to thebefore.

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IEEJ:August 2005

< Reference > Expected framework if full scope of liberalization is realized
Duty of stablesupplyFinal guarantee

Remarks

Legal separationPowertransmission
company

Assigned retailsupply company or
power transmission
company

Framework is established separating
stable supply and final guarantee. It isdifficult to put duty on stable supply toother sector. (ex. Most of European
countries)

License regulation

Transmissionfunction holder
and otherlicense holder

Assigned retailfunction holder

Legal separation is unnecessary
because license is provided on the outershape criteria. It is possible to put duty
on stable supply to the other sector thantransfer department. (ex. UK)

General supply
duty regulation

Existing utility

Existing utility

Similar to the present system, generalelectric utility widely has the duty andfinal guarantee on stable supply. (form of
maintaining present legal framework,overall liberalization is carried out.)

Assigned existing
utility

With no regulation on delivery price,
management is done by industry
volunteer rule. Only the framework ofenergy company remains. (ex. Germany)

Energy business(assured byregulation (alsoindustry’s
transmission
volunteer rule)
sector is liberalized)

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IEEJ:August 2005

Final comment
In the discussion of full scope liberalization scheduled in
2007, the followings are the points.
(i) the new framework after 2003’s revised Electric Utilities Law,especially, could the neutral organization and wholesale power
market accomplish an expected function?
(ii)What kind of disputes can occur under the new framework?
(iii) taking account of the difference of framework between
Japan and USA or Europe, and being compatible with the otherpolitical problems like promotion of efficiency and nuclear orregenerative energy power source which are the objectives ofelectricity system reform, how can we establish the frameworkof long term stable power supply, under the completely new
framework of the reform associated with maintaining present
scope of liberalization, or full range of liberalization?
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