59

Deregulation

City Gas andElectric PowerBusinesses

Electricity
Meaning and Objectives ofElectricity System Reforms

After Full Deregulation

Securing a stable supply ofelectricity
Lowering electricity rates
Expanding choices for customers

After the phased and subsequent full deregulationof 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.

Deregulated

Progress of deregulation
Deregulation has progressed in phases, shifting from large-lot tosmall-lot sales.

Deregulation
progress

Electricity

City gas

26 %

1999

Deregulation begins

1995

100 %

2016

Full deregulation of theretail market

2017

2020

Legal separation of powertransmission and gas pipeline

2022

Deregulation
progress

49 %Our strengths and achievements
Tokyo Gas owns four high-efficiency LNG- fueled
power plants (1.6 million kW equivalent power
generation capacity).

Powergeneration

The present

100 %Kobelco Power Moka Inc. is currently
constructing power station at Moka, in Tochigi
prefecture. Tokyo Gas plans to begin phased
acceptance of supply of electric power from theplant as of 2019, and expand the generation
capacity of its own power sources to around 3.0
million kW by 2020.

Regulated businessElectric power service area

Responsibility for supply(power transmission and distribution operator)(Providing final guarantee service,
maintaining balance of supply and demand, etc.)

Electric power service
covers the whole of Japan

Transmission
and distribution

Our operation
Tokyo gas transmits and distributes electric powerusing transmission and distribution grids owned
and operated by power transmission anddistribution operator.

Deregulated

60Hz

50Hz

Our strengths and achievements
All electric power grids across the whole of Japan, from Hokkaido in
the northeast to Kyushu in the southwest, are connected by power
distribution lines. This infrastructure enables power exchange(lending) across the conventional barriers between individual powercompanies, and supports the stable supply of electricity andefficient operation of power generation facilities.
Although in Japan electricity is distributed at frequencies of
either 50Hz (East Japan) or 60Hz (West Japan) depending on theregion, the installation of specialized transformer equipment in
Nagano and Shizuoka prefectures has enabled the transformationand mutual exchange (lending) of certain volumes of electric power
even between east and west.

RetailUtilizing our sales network, which is closely linked
to local communities, we supply electric power
as a retail service to 1.77 million customers (as ofmarch, 2019).
We also maintain alliances with other companies.

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TOKYO GAS INTEGRATED REPORT 2019

Division of safety responsibility
Gas retail operators, including new market entrants, are obligatedto perform gas appliance inspections and engage in risk prevention
publicity. However, as the existing gas operators have know-how
regarding these obligations, the market environment has been
prepared to make it easy for new entrants to outsource these duties
to existing operators.

City gas
Meaning and Objectives of
Gas System Reforms

Securing a stable supply of city
gas and increasing its use
Lowering city gas rates andincreasing customer
satisfaction
Expanding choices forcustomers and enhancing
safety at customer sites

Safetyregulations

City gas facilities

Gas appliances

Gas meter
Boundary ofproperty

Gasvalves

User’s site

DeregulatedAssetseparation

Businessoperator

Our strengths and achievements
Tokyo Gas owns four LNG terminals in theKanto region. Utilizing these four terminals(the Negishi, Ohgishima, and Sodegaura
LNG terminals in Tokyo Bay, and Hitachi
LNG terminal in Ibaraki Prefecture), weare promoting stable, efficient terminal
operations.

Gas pipeline operator

Gas retail operator

Inner-pipe leakage
testing

Gas applianceinspection, etc.

Safetyresponsibility

Production

Emergency
maintenanceFull Deregulated Market of the Electricity and Gas
Number ofcompanies*Electricity
City gas

Approximate
potential customers(million)

Approximatemarket size(¥ trillion)

85
2926

8.0
2.8
2.4

10Within TEPCO’s
domain203*Former general electric power operators, former general gas operators*From materials officially announced by the Ministry of Economy, Trade and Industry

Regulated business

Expansion of city gas service area

Obligations of fair operation andguarantee of final (last resort) supply to
all retail operators
Our achievements
Tokyo Gas’s pipeline network covers a total distanceof over 60,000 km in the Kanto region. We are also
expanding and enhancing our network with new
infrastructure to improve our supply capabilities.

User(excluding gas meters)

SupplyMoving forward city
gas service willcontinue to expand thecity gas service area

We operate a safe and stable pipeline network.

Deregulated
Service area

Our strengths and achievements
Our sales organization is closely linked to localcommunities.
We also have the capability to propose a variety ofenergy solutions.

Retail

Because city gas business developed through efficient pipeline
network construction, utilizing economies of scale, the supply areas
are centered primarily around urban areas, and city gas business do
not currently operate in regions with low population densities or low
industrial concentrations.
In Japan, city gas business rely on LNG imports from overseas forthe majority of our raw materials, and have established a supply
infrastructure, within the scope of reason, by constructing LNG
terminals in proximity to major consumer areas. Because of thishistory, the development of a nationwide gas pipeline network has notprogressed in the same way as the electric power business.
In the Japanese government’s gas system reforms, too, experts havepointed out the necessity for developing an overall optimal pipeline
network, and considerations are currently underway with regard to this.