Deregulation of the Gas and Electric Industries
Overview of Gas Business Regulations
General gas utilities are granted the right to establish regional monopolies within their service area but are subject to regulation under the Gas
Business Act in order to protect user interests. Large-scale users with an annual gas consumption of 100,000 m3 or more fall within the scopeof deregulation. Users with an annual gas consumption of less than 100,000 m3 are subject to regulation. Details of typical regulations arepresented briefly as follows.

1 Rate Regulations●The Act states that “The rates consist of fair costs incurred as aresult of efficient management and fair profits,” and rates must
undergo inspection by the Ministry of Economy, Trade andIndustry.
● The production costs required to supply gas to customers andthe costs required to fulfill safety responsibilities are considerednecessary costs for gas utilities, and these costs may therefore
be factored into gas rates to within an appropriate extent.
●●In regard to profits, capital costs related to facilities necessary tooperate a gas business, based on profit figures calculated using
the total of shareholder capital cost and debt cost, may befactored into gas rates to within an appropriate extent. This
provision is meant to allow gas utilities to operate their businessin an appropriate manner.
Approval from the Ministry of Economy, Trade and Industry is
required to raise rates, but lowering rates only requires
notification to be submitted.

Overview of electricity and gas system reforms and the main schedule for revising the Business Act
Revision of the Business Act is designed to provide users with an enhanced degree of freedom with respect to their choice of energy, suppress energyrates, and secure a safe and stable supply of energy thereby increasing benefits to consumers by creating a comprehensive energy market throughintegrated reform in the energy field.
The proposal to revise the Business Act was approved by Japan’s Cabinet in March 2015 and enacted at an ordinary session of the Diet In June 2015.
Electricity
2015

April Establishment of an organization for operating wide-area electrical grids
April

Full deregulation of the retail market
26％

2016

40％

62％

100%

Prior to 2004

2004

2005

2016～

2,000kW or more
Large-scale factory, other

500kW or more
Medium-scale factories, etc.

50kW or more
Small factories, etc.

Less than 50kW
Residential and small commercial users

2017
2020

April Legal separation of the power transmission and distributions networks

2022

Our StanceTokyo Gas has positioned electricity system reform as a significant opportunity to expand its business. Utilizing the following
inherent strengths, the Company will take up the challenge of growing its power generation business.
① Our superior LNG procurement capabilities② Our competitive power sources namely, our natural gas-fired thermal power plants that employ highly efficient combined
cycle generation methods, and③ Frequent opportunities to meet directly with customers.

37

Tokyo Gas Annual Report 2015

2 Obligation to Supply●In exchange for receiving monopoly rights within their city gas
supply area, gas utilities are required by principle to supply to
any user upon request. Moreover, once supply has beencommenced, the utility may not cease supply without justifiablegrounds.

3 Safety Responsibilities

Gas utilities are responsible for ensuring the safety of gas
facilities, including users’ assets. “Gas facilities” refers to all
facilities installed for the purpose of supplying gas as well as
auxiliary facilities and includes gas generating facilities, pipelines,gas meters, and gas taps. Gas utilities are required to maintainall gas facilities at levels safe for operation.
● If gas utilities manufacture their own gas facilities, they arerequired to ensure that these facilities conform to technicalstandards. Gas utilities are also obligated to inform users withregard to potential dangers that could arise from gas usage andconduct inspections to assess conformity to technical standardsof certain gas facilities.
●Gas
2015
2016
Full deregulation of the retail market

Effective date of full liberalization of Gas retail market is set by the government ordinance in less than two years and six months from theissued day of the revised law (June 24, 2015).

53%

56%

63%

100%

Prior to 2004

2004

2007

2017～

1 million ｍ3 or more
Manufacturers and large-scalecommercial facilities

500,000 ｍ3 or more
Medium-scale factories, et

100,000 ｍ3 or more
Small factories, etc.

Less than 100,000 ｍ3
Residential and small commercial users2017

20202022

April Legal separation of the gas pipeline network

Against the backdrop of a fiercely competitive gas business environment attributable to full retail deregulation, the independence and autonomy of management is expected to rise. Under these circumstances, Tokyo Gas is harnessing the following
unique attributes to take all appropriate measures from each of the strategic, financial, and IT system perspectives to address
full deregulation as a priority issue and ensure that it remains the preferred choice of customers.
①Relationship with more than 11 million customers②Advanced energy solution technologies provided as a leader in the field of natural gas③Robust infrastructure centered on the Tokyo metropolitan area, including LNG terminals and pipeline facilities

Tokyo Gas Annual Report 201538