TOKYO GAS ANNUAL REPORT 2018

Electricity

Overall image after full deregulation

City Gas andElectric PowerBusinesses

Meaning and Objectives ofElectricity System Reforms

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

After Full Deregulation

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,

Deregulated

Power generation

Japan’s energy market has become fully deregulated.

Our strengths and achievements

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

Deregulation
progress

Electricity

City gas

26 %

1999

Deregulation begins

100 %

2016

Full deregulation ofthe retail market

1995

Deregulation
progress

49 %The present

2017Tokyo Gas owns four high-efficiency LNGfueled power plants (1.6 million kW equivalent
power generation capacity).
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.

100 %Legal separation of power2020 transmission
and gas pipeline 2022

Electric power service area

Regulatedbusiness

Transmission and distribution

Electric power service
covers the whole of Japan

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

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

60Hz

50Hz

All electric power grids across the whole of Japan, from
Hokkaido in the northeast to Kyushu in the southwest, areconnected by power distribution lines. This infrastructure
enables power exchange (lending) across the conventional
barriers between individual power companies, and supports
the stable supply of electricity and efficient operation ofpower generation facilities.
Although in Japan electricity is distributed at frequencies of
either 50Hz (East Japan) or 60Hz (West Japan) dependingon the region, the installation of specialized transformer
equipment in Nagano and Shizuoka prefectures has enabled
the transformation and mutual exchange (lending) of certain
volumes of electric power even between east and west.

19Deregulated

Retail
Our strengths and achievements
Utilizing our sales network, which is closely
linked to local communities, we supply
electric power as a retail service to 1.13 million
customers (as of march, 2018).
We also maintain alliances with other companies.

Meaning and Objectives of Gas
System Reforms

Gas retail operators, including new market entrants,
are obligated to perform gas appliance inspections andengage in risk prevention publicity. However, as theexisting gas operators have know-how regarding theseobligations, the market environment has been prepared tomake it easy for new entrants to outsource these duties toexisting operators.
Safetyregulations

City gas facilities

Gas appliances

Gas meter
Boundary ofproperty

Message

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

Division of safety responsibility

Introduction

City gasGasvalves

User’s site

Deregulated

Our strengths and achievements

Gas pipeline operator

Gas retail operator

Inner-pipe leakage
testing

Gas applianceinspection, etc.

Safetyresponsibility

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

City gas

10Within TEPCO’s
domain203

Approximate
potential
customers (Million)

Approximate
market size(¥ trillion)

85
29
26

8.0
2.8
2.4

Regulatedbusiness

Expansion of city gas service area

SupplyObligations of fair operation andguarantee of final (last resort) supply to
all retail operators

Moving forward city gas service
will continue to expand the city
gas service area

Service area

We operate a safe and stable pipeline network.

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

Financial data

RetailInvisible assets

Deregulated

Because city gas business developed through efficientpipeline 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 withlow population densities or low industrial concentrations.
In Japan, city gas business rely on LNG imports fromoverseas for the majority of our raw materials, and haveestablished a supply infrastructure, within the scope ofreason, by constructing LNG terminals in proximity to major
consumer areas. Because of this history, the development ofa nationwide gas pipeline network has not progressed in thesame way as the electric power business.
In the Japanese government’s gas system reforms, too,experts have pointed out the necessity for developing an
overall optimal pipeline network, and considerations are
currently underway with regard to this.

Corporate governanceOur achievements
Tokyo Gas’s pipeline network covers a total
distance of over 60,000 km in the Kanto region.
We are also expanding and enhancing ournetwork with new infrastructure to improve oursupply capabilities.

Business overview*Former general electric power operators, former general gas operators*From materials officially announced by the Ministry of Economy, Trade and Industry

Overall image after
full deregulation

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), we are driving
stable and efficient terminal operations.

User

GPS2020

Production

Businessoperator

Assetseparation

20