Biannual Report of the Electricity and Gas Market
Surveillance Commission(From September 2022 to March 2023)

December 2023
Electricity and Gas Market Surveillance Commission

Pursuant to the provisions of Article 66-16 of the Electricity Business Act (Act No. 170 of 1964), the Electricity
and Gas Market Surveillance Commission (hereinafter referred to as the “Commission”) publishes its operating
report for the period from September 1, 2022 to March 31, 2023 as follows.
December 8, 2023

Electricity and Gas Market Surveillance Commission
Akihiko Yokoyama, Ph.D, Chairperson

1Biannual Report of the Electricity and Gas Market Surveillance Commission(From September 2022 to March 2023)
Table of Contents
Introduction Establishment of the Electricity and Gas Market Surveillance Commission .............. 4
Chapter 1. Efforts to ensure fair trade in the retail and wholesale electricity trade ......................... 5
1.1.

Qualification screening for registration of electricity retailers and retail services ........................... 5

1.2.

Publication of the Electricity Trading Report ................................................................................... 5

1.3.

Provision of consultation services ................................................................................................... 5

1.4.

Surveillance on retail trade .............................................................................................................. 6

1.5.

Examination of retail electricity regulated tariff for which transitional measures
have been taken .............................................................................................................................. 9

1.6.

Audit of deemed electricity retailers .............................................................................................. 10

1.7.

Ex-post facto assessment of retail electricity regulated tariff based on transitional measures
after the end of the cost calculation period ................................................................................... 10

1.8.

Surveillance on wholesale trade .................................................................................................... 13

1.9.

Activation of wholesale electricity trade......................................................................................... 17

Chapter 2. Efforts in the field of electricity transmission and distribution services ...................... 22
2.1.

Surveillance on electricity transmission and distribution business ............................................... 22

2.2.

Audit of general electricity transmission and distribution utilities .................................................. 23

2.3.

Ex-post facto assessment of profit and loss of wheeling services by general electricity
transmission and distribution utilities ............................................................................................ 24

2.4.

Surveillance on procurement and operational status of balancing power and study to secure
more efficiency .............................................................................................................................. 24

2.5.

Surveillance on the operational status of the imbalance pricing system ...................................... 26

2.6.

Examination of wheeling service charges under the new wheeling service charge system(revenue cap system), establishment of the Working Group for More EfficientElectricity Transmission and Distribution and Confirmation of the Progress of Plan,
and consideration of electricity generation-side fee. .................................................................... 26

Chapter 3. Efforts to ensure fair trade in the retail and wholesale gas trade.................................. 29
3.1.

Qualification screening for registration of gas retailers ................................................................. 29

3.2.

Publication of the Gas Trading Report .......................................................................................... 29

3.3.

Provision of consultation services ................................................................................................. 29

3.4.

Surveillance on retail trade ............................................................................................................ 30

3.5.

Audit of deemed general gas retailers........................................................................................... 31

3.6.

Ex-post facto assessment of retail gas regulated tariff based on transitional measures
after the end of the cost calculation period ................................................................................... 31
2

3.7.

Follow-up on gas wholesale commitment ..................................................................................... 33

Chapter 4. Efforts in the field of gas pipeline services ...................................................................... 34
4.1.

Surveillance on general gas pipeline service providers and specified gas pipeline
service providers ........................................................................................................................... 34

4.2. Audit of general gas pipeline service providers ................................................................................ 34
4.3.

Ex-post facto assessment of profit and loss of transportation services bygeneral gas pipeline service providers ......................................................................................... 35

Chapter 5. Efforts in heat supply business ......................................................................................... 36
Chapter 6. Public relations, dispute resolution, etc. .......................................................................... 37
6.1.

Public relations and consumer protections ................................................................................... 37

6.2.

International cooperation ............................................................................................................... 37

6.3.

Dispute resolution .......................................................................................................................... 383

Introduction Establishment of the Electricity and Gas Market Surveillance Commission
In conjunction with the implementation of electricity system reform based on the Act on the Partial Amendmentof the Electricity Business Act, etc. (Act No. 47 of 2015, hereinafter referred to as the “Third Step Revision of Act”),
which came into effect in 2015, the Electricity Market Surveillance Commission was established on September 1,
2015, as a regulatory organization with independence and a high level of expertise under direct control of the
Minister of Economy, Trade and Industry in order to strengthen functions such as surveillance of proper electricity
trade and to take necessary measures to ensure proper electricity trade. Since April 1, 2016, roles relating to gas
business and heat supply business have been added and the name has been changed to the Electricity and Gas Market
Surveillance Commission (hereinafter referred to as “Commission”).
The Commission is composed of a chairperson and four commissioners. They are appointed by the Minister of
Economy, Trade and Industry from experts with professional knowledge and experience in laws, economics, financeor engineering with the ability to make fair and neutral decisions in relation to their duties, and are required toexercise their authorities independently.
The term of office of the chairperson and commissioners is set at three years according to Article 66-8 of theElectricity Business Act. The term of office was renewed at the end of August 2021, and the chairperson andcommissioners as of March 31, 2023 are as follows.
[Names of commissioners](Chairperson)
Akihiko Yokoyama, Ph.D

Professor Emeritus, the University of Tokyo(Commissioners)
Yumiko Iwafune, Ph.D

Project Professor, Institute of Industrial Science, the University of Tokyo

Kaeko Kitamoto Certified Public Accountant
Kuninobu Takeda, Ph.D

Professor, Department of Law and Political Science, Graduate School of Law and

Politics, Osaka University
Masanori Maruo Managing Director, SMBC Nikko Securities Inc.

4

Chapter 1.
1.1.

Efforts to ensure fair trade in the retail and wholesale electricity trade

Qualification screening for registration of electricity retailers and retail services[Summary]

・ As a result of screening by the Commission for registration of electricity retailers and retail services, up
until the end of March 2023, 721 electricity retailers and 31 retail services were registered.

When the Minister of Economy, Trade and Industry intends to register electricity retailers
and retail services by specified electricity transmission and distribution utilities, the Minister
is required to hear the opinions of the Commission. The Commission, upon receiving therequest for opinions from the Minister of Economy, Trade and Industry, conducted thequalification screening from the viewpoint of whether the applicants do not fall under theregistration refusal requirements stipulated in the Electricity Business Act (from the viewpointof the protection of the interest of electricity consumers) and shared the results with the
Minister of Economy, Trade and Industry. As a result of the screening, up until the end of
March 2023, 721 electricity retailers were registered, including 10 new registrations and 27
cancellations. On the other hand, up until the end of March 2023, 31 retail services wereregistered, including 2 new registrations and no cancellations.
1.2.

Publication of the Electricity Trading Report[Summary]

・ The Commission collected information necessary to surveil retail electricity trade from electricity
industry utilities and published the results every month.

The Commission, according to the Electricity-Related Reporting Rules (Ministry of International Trade andIndustry Ordinance No. 54 of 1965), has regularly received information report necessary to surveil retail electricity
trade from electricity industry utilities and Japan Electric Power Exchange (herein after referred to as the “JEPX
market”), wholesale market. A part of the information received in these reports, such as the amount of electricity
sales, was published every month.
1.3.

Provision of consultation services[Summary]

・ The Commission established a consultation desk (information provision desk) to provide advice toconsumers regarding problems when concluding a retail supply contract, receive information regarding5

possible legal violations by business operators, and provide administrative guidance, if necessary.

The Commission established a consultation desk to respond to inquiries received from electricity customers andprovided answers and advice to questions. During a period from September 2022 to March 2023, a total of 3,358
inquiries were received.
Through these services, if any information on inappropriate business activities was detected, the Commission
investigated the facts and provided administrative guidance to the concerned electricity retailers, if necessary.
○ Trends in the number of inquiries (electricity) to the consultation desk and examples
Trends in the number of inquiries to the consultation desk
regarding electricity(Cases)●I received a notice from my contracted electricity company informingme that they are withdrawing from the electricity business and that I
should switch to another power company. What should I do?

1.4.

Jan - Mar 2023

Jul - Sep 2022

Oct - Dec 2022

Apr - Jun 2022

Jan - Mar 2022

Jul - Sep 2021

Oct - Dec 2021

Apr - Jun 2021

Jan - Mar 2021

Jul - Sep 2020

Oct - Dec 2020

Apr - Jun 2020

Jan - Mar 2020

Oct - Dec 2019

Apr - Jun 2019
Jul - Sep 2019

Jan - Mar 2019

Jul - Sep 2018

Oct - Dec 2018

Apr - Jun 2018

Jan - Mar 2018

Jul - Sep 2017

Oct - Dec 2017

Apr - Jun 2017

Jan - Mar 2017

Jul - Sep 2016

Oct - Dec 2016

Apr - Jun 2016

⇒ Although there will not be a sudden power outage, after such noticefrom a general electricity transmission and distribution utility, power
supply may be stopped. So, please complete the contract procedureswith your new power company as soon as possible.
●

I was suddenly charged a high electricity bill. I suspect that they
incorrectly charged me.

⇒ Please review the materials provided by your electricity company
regarding contract details, power consumption, etc. Such information
may be provided in writing, or via email or your account page.

Surveillance on retail trade[Summary]

・ The Commission provided administrative guidance to business operators that engaged in problematic
practices under the Electricity Business Act regarding retail electricity sales.

・ As an example of major efforts to surveil retail trade, the Commission provided administrative guidance
to electricity retailers and monitored the retail market by focusing on specific retail contract prices asfollows.

In April 2016, entry into the retail electricity business was fully liberalized, allowing any consumer, including
households, to freely choose their electricity company and rate structure. Under the situation, to optimize the retailelectricity supply trade, the Commission, based on the "Guidelines for Retail Electricity Business," monitors theactivities of business operators, regarding the provision of information to consumers and the contractual form andcoverage, including provision of administrative guidance to the operators who engaged in problematic practices
under the Electricity Business Act.
The specific examples of administrative guidance provided during a period from September 2022 to March 2023
are as follows.
(1) Administrative guidanceElectricity retailer A mistakenly collected fees for issuing meter reading slips for approximately 2,000 retail6supply contracts. The practice is considered to be problematic from the viewpoint of ensuring proper electricity
trade. Therefore, in October 2022, the Commission provided an administrative guidance to the company A topromptly implement the necessary collective measures.
(2) Collection of report
On March 30, 2023, general electric utilities were found to have committed acts in violation of the Act on
Prohibition of Private Monopolization and Maintenance of Fair Trade (Act No. 54 of 1947) and received a ceaseand-desist order or a surcharge payment order from the Fair Trade Commission.
In response to the announcement of this measure, on the same day, the Commission, based on the authority
delegated pursuant to the provisions of Article 114, Paragraph 2, and Article 106, Paragraph 3 of the Electricity
Business Act, requested the five electricity retailers to report the matter.
(3) Focused retail market monitoring
To ensure fair competition in the retail market, the Commission has begun the Focused Retail Market Monitoringfrom September 2019 and published the survey results approximately twice a year. The monitoring to understandthe competitive situation in the retail market is performed through review of retail contract details by interviewing
with electricity retailers who provide retail contracts that fall below a certain price level.
(a) BackgroundThe summary of the Specialized Meeting for Transitional Regulated Electricity Tariff (hereinafter referred to as
the “Specialized Meeting for Transitional Regulated Tariff”) held on April 23, 2019, cited the “sustainability of thecompetitive environment” as one of the factors to be considered when deciding whether to lift the transitional
regulated electricity tariff. More specifically, the meeting pointed out that if a business operator that has dominant
power in the wholesale market provides unfair internal subsidy to its internal retail division, and the retail divisionthat receives such internal subsidy engages in acts such as underselling, the distortion of competition in the retailmarket could happen, resulting in the maintenance or strengthening of the said business operator’s position in theretail market. In addition, the meeting noted that (1) to prevent such unfair internal subsidies, the non-discriminationof internal and external trade should be effectively secured as the most realistic means, and (2) to detect whether“unfair internal subsidy” is provided and whether any distortion of competition in the retail market is caused byunderselling, the market situation should be properly understood by monitoring specific retail prices.
Based on these recommendations, the 38th and 40th Specialized Meeting for Policy Design held in May and July
2023 studied how to implement the focused retail market monitoring, resulting in the initiation of the monitoring in
September 2019.
(b) Monitoring results
During a period from September 2022 to March 2023 covered by this biannual report, the 78th Specialized
Meeting for Policy Design held in October 2022 examined retail contracts that started electricity supply between
January and June 2022 and reported that no individual case was found where the retail unit price was lower than thevariable power supply cost, as a result of the investigation.
7

(4) Proposals for institutional measures related to retail electricity businessResponding to the increasing withdrawal of electricity retailers due to the soaring electricity market prices, the75th to 78th Specialized Meeting for Policy Design held in July to October 2022 discussed the necessary
institutional measures. These meetings concluded that the following institutional measures should be implemented
regarding the matters related to the start of, after the start of, and the withdrawal from retail electricity business. In
December 2022, the Commission submitted a proposal to the Minister of Economy, Trade and Industry as follows.
⚫

Matters related to the start of retail electricity business•

The relevant laws and regulations should stipulate that an applicant for registration is required to submit
documents related to “analysis of business risk factors” and “examination of countermeasures against suchrisk factors,” etc., together with a three-year business plan based on such information. Furthermore, it should
be stipulated that the proper analysis of the above upon registration is confirmed.

⚫

Matters related to after the start of retail electricity business•

The Guidelines for Electricity Retail Business should stipulate that it is desirable practice for electricity
retailers to provide easy-to-understand information to consumers about their financial situation throughwebsites, pamphlets, flyers, etc. as much as possible. Furthermore, it should be stipulated that providing
information in a false or misleading manner is considered a problematic practice.

⚫

Matters related to the withdrawal from retail electricity business•

The relevant laws and regulations should stipulate that if an electricity retailer intends to suspend or abolishall of its business, the retailer must provide a notification period of 30 days or more to its customers, and inparticular, a notification period of 90 days or more, in cases where a longer notification period is likely
required, such as when canceling extra-high or high voltage contracts. Furthermore, it should be stipulated
that in providing such information, the retailer is required to use a method that ensures proper recognition
by customers and letters and formats written in an easy-to-see manner.

•

The relevant laws and regulations should stipulate that if an electricity retailer intends to suspend or abolishpart of its business, which may impede the interests of its consumers, the retailer is required to ensure theabove-mentioned notification period and appropriate notification method.

•

The Guidelines for Electricity Retail Business should stipulate that it is a problematic practice for anelectricity retailer to not promptly notify its customers when the retailer recognizes the possibility ofcancellation of wheeling service contracts from general electricity transmission and distribution utilities due
to non-payment of wheeling service charges, and thinks that there is no prospect of taking measures to avoid
such a situation. Furthermore, it should be stipulated that in providing such information, the retailer isrequired to use a method that ensures proper recognition by customers and letters and formats written in aneasy-to-see manner.

•

The Guidelines for Electricity Retail Business should stipulate that it is appropriate for an electricity retailer
to review its system to handle inquiries and complaints in a timely manner as necessary, when the numberof inquiries and complaints from consumers is expected to increase due to suspension or closure of retailelectricity business, revision of rates, etc. Furthermore, it should be stipulated that failure to take such8

measures is a problematic practice.
•

The Guidelines for Electricity Retail Business should stipulate that it is a desirable practice for an electricity
retailer to develop a system to allow provision of multiple methods, such as the website and email, to its
consumers to choose when they intend to cancel a retail supply contract or make related inquiries.

1.5.

Examination of retail electricity regulated tariff for which transitional measures have been taken[Summary]

・ The Commission examined the applications for approval to revise their special retail supply provisions
submitted by seven deemed electricity retailers. As a result, the Commission submitted its initial
response to the Minister of Economy, Trade and Industry, informing that it is appropriate to recalculate
the costs by reviewing the latest fuel costs, wholesale electricity market prices, and electricity futures
prices.

・ The Commission checked the details of the notifications of changes to the special retail supply
provisions due to the introduction of the revenue cap system by six deemed electricity retailers. As aresult, the Commission answered to the Minister of Economy, Trade and Industry that the Commission
has no objections to the details of these notifications.

In November 2022 and January 2023, seven deemed electricity retailers (Hokkaido Electric Power Co., Inc.,
Tohoku Electric Power Co., Inc., TEPCO Energy Partner Inc., Hokuriku Electric Power Company, the Chugoku
Electric Power Co., Inc., Shikoku Electric Power Co., Inc. and The Okinawa Electric Power Co., Inc.) submitted
the applications for approval to revise their special retail supply provisions to the Minister of Economy, Trade andIndustry. Accordingly, in December 2022 and January 2023, the Minister of Economy, Trade and Industry asked theCommission’s opinions about these applications.
Upon receiving the request for opinions from the Minister of Economy, Trade and Industry, the 28th to 39th
Specialized Meeting for Tariff System held in December 2022 to March 2023 conducted strict examinations toconfirm whether the details of the applications were appropriate in light of the Guidelines for Examination of Special
Retail Supply Provisions of Deemed Electricity Retailers established in April 2016.
The 37th and 38th Specialized Meeting for Tariff System held in March 2023 discussed the period for recording
fuel costs, based on the latest exchange rates and fuel cost levels. Based on this result, in March 2023, theCommission submitted its initial response to the Minister of Economy, Trade and Industry, stating that it isappropriate to recalculate the costs related to these applications by reviewing the latest fuel costs, wholesale
electricity market prices, and electricity futures prices.
In February 2023, six deemed electricity retailers (TEPCO Energy Partner Inc., Chubu Electric Power Miraiz Co.,
Inc., Hokuriku Electric Power Company, the Kansai Electric Power Co., Inc., the Chugoku Electric Power Co., Inc.,and Kyushu Electric Power Co., Inc.) submitted the notifications of changes to the special retail supply provisions
due to the introduction of the revenue cap system to the Minister of Economy, Trade and Industry. Accordingly, in
March 2023, the Minister of Economy, Trade and Industry asked the Commission’s unreserved opinions about thesenotifications.
9Upon receiving the request for unreserved opinions from the Minister of Economy, Trade and Industry, the 38th
Specialized Meeting for Tariff System held in March 2023 checked the details of these notifications in light of theThird Interim Report of the Sustainable Electricity System Development Subcommittee, Basic Policy Subcommittee,
Advisory Committee for Natural Resources and Energy in January 2022 and Article 2 (5) and (13) of the Assessment
Standards, etc. for Administrative Action by the Minister of Economy, Trade and Industry based on the
Supplementary Provisions of the Act on the Partial Amendment of the Electricity Business Act (20160325
Resources No. 12) (hereinafter referred to as the “Assessment Standards”).

As a result, in March 2023, theCommission answered to the Minister of Economy, Trade and Industry that the Commission has no objections to
the details of these notifications.
1.6.

Audit of deemed electricity retailers[Summary]

・ The Commission audited the operations and accounting of deemed electricity retailers.
When the retail electricity market was fully liberalized in April 2016, the general electric utilities were allowed
to maintain regulated tariff (transitional regulated tariff) as a transitional measure for retail tariff for low voltage(household use, etc.).
Pursuant to the provisions of Article 21 of the Supplementary Provisions of the Act on the Partial Amendment of
the Electricity Business Act (Act No. 72 of 2014), the Committee audited the deemed electricity retailers subject totransitional measures for regulated tariff (10 companies).
1.7.

Ex-post facto assessment of retail electricity regulated tariff based on transitional measures after

the end of the cost calculation period[Summary]

・ The Commission conducted ex-post facto assessments of retail electricity regulated tariff based ontransitional measures after the end of the cost calculation period. As a result, the Commission submitted
its opinion to the Minister of Economy, Trade and Industry, stating that none of the three companies
subject to audit were required to apply for approval for price revision.

The Ministry of Economy, Trade and Industry is authorized to conduct ex-post facto assessment of retailelectricity regulated tariff based on transitional measures in the Supplementary Provisions of the Act on the Partial
Amendment of the Electricity Business Act for every fiscal year after the end of the cost calculation period tocheck needlessly affluent profit margins and to release the results to the public.
Upon receiving the request for opinions from the Minister of Economy, Trade and Industry in February 2023,
the 36th Specialized Meeting for Tariff System held in February 2023 conducted ex-post facto assessment andchecking over three deemed electricity retailers whose cost calculation period had ended (Chubu Electric Power
Miraiz Co., Inc., the Kansai Electric Power Co., Inc., and Kyushu Electric Power Co., Inc.) based on Article 2 (6)105 of the Assessment Standards. As a result, the Commission concluded that the three deemed electricity retailers
subject to ex-post facto assessment this time were not required to apply for approval for the reduction of current
tariff (Reference: Figure 1: Results of applying the Assessment Standards).
Based on the above, in March 2023, the Commission submitted its opinion to the Minister of Economy, Tradeand Industry, stating that no retailers were required to apply for approval for the reduction of retail electricity
regulated tariff based on transitional measures, in light of Article 2 (6) 5 of the Assessment Standards.

11

○ Discussion summary of the Specialized Meeting for Tariff System (February 2023)
Figure 1: Results of applying the Assessment Standards●

As a result of examination based on the Assessment Standards, the Commission concluded that threedeemed electricity retailers (*1) that had not revised their tariffs after the end of the cost calculation period
were not subject to the consideration of issuing an order for them to apply for approval for price revision.
*1: The following companies were not subject to ex-post facto assessment, because they were then applying for approval to increase retail transitional regulated electricity
tariff: Hokkaido Electric Power, Tohoku Electric Power, TEPCO Energy Partner, Hokuriku Electric Power, Chugoku Electric Power, Shikoku Electric Power, and Okinawa
Electric Power.
(Unit: billion yen)

Results of examination based on the Assessment Standards(steps 1 and 2)
Step 1

Chubu ElectricPower Miraiz*2

Kansai ElectricPower

Kyushu ElectricPower

10 companies

A. Criteria based on profit ratio of regulated sectors of electricity business
Average for 3 fiscal years (1) *3
Average of 10 companies for 10 fiscal years (2)Does the figure exceed the average of 10 companies for 10 fiscal years [i.e., (1) > (2)]?

Step 2

B. Criteria based on accumulated excess profits of regulated sectors of electricity business

Accumulated excess profits at the end of FY2020 (3) *4
Excess profits at the end of FY2021 (4) *5
Accumulated excess profits at the end of FY2021 [i.e., (5) = (3) + (4)] *5
Business compensation amount (specified level of amount) (6) *6
Does the figure exceed the specified level of amount [i.e., (5) > (6)]?
C. Criteria based on profit and loss of liberalized sector *7
FY2020 (7)FY2021 (8)Are the figures in red for the last two years [i.e., (7) < 0 and (8) < 0]?
ResultIs the company subject to the consideration of issuing an order for it to apply for
approval for price revision? (Either both A and B are Yes, or A and C are Yes.)*2: Figures before FY2019 were based on the data from the former Chubu Electric Power. Figures from FY2020 were based on the data from Chubu Electric Power Miraiz.
*3: Simple average of profit ratio of regulated sectors of electricity business of each year for a period of three years from April 2019 to March 2022
*4: The amount excluding the portion of the former General Provisions for Selection from the accumulated excess profits up to FY2015*5: For Kansai Electric Power, the excess contract amount (26 million yen) has already been reflected (subtracted) in the current year's excess profits and the accumulated excess profits at the end of thecurrent year. This is not applicable to other companies. (See slide 7 for more details.)*6: Business compensation amount equivalent for the regulated sector (limited to those related to specified retail supply provisions)*7: Profit and loss of liberalized sector: Profit and loss of liberalized sector of electricity business(Source: Prepared by the Executive Bureau of the Commission based on the interviews and thedepartmental statement of income and expenditure of each business operator)(Overall results)
Step 1 of the Assessment Standards [criteria based on profit ratio of electricity business] showed thatthree companies (Chubu Electric Power Miraiz, Kansai Electric Power, and Kyushu Electric Power)
had the average profit ratio for the last three fiscal years exceeding the average profit ratio of 10
companies for 10 fiscal years.
However, Step 2 of the Assessment Standards [criteria based on accumulated excess profits] or[criteria based on profit and loss of liberalized sector] shows that all three companies have theaccumulated excess profits at the end of FY2021 lower than the specified amount, and the businessof the liberalized sector did not suffer a deficit for the last two years.
As a result of the above examination based on the Assessment Standards, the Commission
concluded that three deemed electricity retailers that had not revised their tariffs after the end of thecost calculation period (those other than Hokkaido Electric Power, Tohoku Electric Power, TEPCOEnergy Partner, Hokuriku Electric Power, Chugoku Electric Power, Shikoku Electric Power, andOkinawa Electric Power) were not subject to the consideration of issuing an order for them to apply
for approval for price revision.
(Conclusions)
Based on the above, the Commission concluded that the deemed electricity retailers subject to expost facto assessment this time were not required to apply for approval for the reduction of current
tariff.
The above conclusion was the result of an assessment that also reflected the excess contract
amount confirmed by Kansai Electric Power (not applicable for other companies).

12

1.8.

Surveillance on wholesale trade[Summary]・ Through monitoring of the day ahead market, the Commission discovered that Chugoku Electric Power
Co., Inc. had not disclosed insider information that was required to be disclosed in a timely manner,and had been conducting related trades in the day ahead market. Therefore, on March 31, 2023, theCommission issued a business improvement administrative recommendation to the company. In
addition, the Commission confirmed several incorrect bids and provided business improvementadministrative guidance in writing to business operators that had not yet delivered their entire surplus.

・ The result of monitoring of the baseload market discovered that one of the large-scale electricity
generation utilities in the East Japan area changed its estimation method of the unit fuel cost price andincreased the supply price in the auction held in September 2022. As the company did not provide an
objective and reasonable explanation regarding the timeliness of the changes, the Commission
requested this business operator to make corrections at subsequent auctions. Then, the correction was
duly confirmed in an auction held in November, 2022.

To ensure proper electricity trade, the Commission monitored and analyzed the trade situation in the wholesale
electricity market, and provided administrative guidance if any problematic practice was observed.
In addition, every quarter, the Commission prepared and published an electricity market monitoring report thatanalyzed and verified the voluntary efforts by general electric utilities and JERA Co., Inc. as well as thecompetitive situation in the electricity market with stationary observation (Reference: Figure 2: Major indexes in
the reports from July to September 2022).
Figure 2: Major indexes in the reports from July to September 2022
Reference

Report this time
July - Sep 2022

Comparison to the same
period last year
(July - Sep 2021)

FY2021

FY2020(Apr 2021 - Mar 2022)(Apr 2020 - Mar 2021)

Selling bid volume compared to the same
period last year

0.9 times

1.1 times

1.0 times

Buying bid volume compared to thesame period last year

0.9 times

1.1 times

1.1 times

1.1 times
1.1 times

85.2 billion kWh

92.3 billion kWh

327.2 billion kWh

312.8 billion kWh

0.9 times

1.1 times

1.0 times

1.1 times

24.8 yen/kWh

8.2 yen/kWh13.5 yen/kWh11.2 yen/kWh

Contracted volume

1.51 billion kWh

1.07 billion kWh

4.18 billion kWh

4.02 billion kWh

Average contract price28.4 yen/kWh

8.4 yen/kWh14.5 yen/kWh12.4 yen/kWh

Contracted volume0.003 billion kWh

0.015 billion kWh

0.047 billion kWh

0.027 billion kWh

Supply volume to outside
the group

14.02 billion kWh15.64 billion kWh

TenderContract
Contract

New entrants

ForwardmarketElectricity
sales

Contracted volume compared to the same
period last year
Average contract price(System price)

Occurrence rate of market splitting between
the east and west market

IntradaymarketBilateral
trade

Retail market(reference) *1

Contracted volume

ContractDay-ahead market

JEPX market

Percentage in electricity sales *3

Electricity sales
Electric sales compared tothe same period last year
Share of new entrants*2

214.3 billion kWh

832.1 billion kWh816.4 billion kWh

43.8 billion kWh

47.6 billion kWh

178.6 billion kWh

153.2 billion kWh

0.9 times

1.2 times

1.2 times

1.2 times

19.5% (as of September)

21.7% (as of September)

217.2 billion kWh*1: Source: Electricity Trading Report*2: The monthly electricity sales may slightly differ from the actual monthly demand, because the source data from the Electricity Trading Report shows the monthly electricity
sales volume and sales amount measured between the dates of meter reading, the practice that most business operators use. To avoid giving excessive work in calculating
precise monthly sales from the first day to the last day of a month to business operators, the Commission permits them to report the sales between the dates of meter reading
as “monthly sales.”*3: The percentage in electricity sales indicates the average value for the relevant period.

13

Source: Prepared by the Executive Bureau of the Commission based on the documents submitted to the 80th
Specialized Meeting for Policy Design held in December 2022.
To realize stable and low-cost supply of electricity through competition among electricity retailers, which is thegoal of electricity system reform, the activation of the wholesale electricity market is indispensable. Therefore, theCommission made the efforts toward the activation of the wholesale electricity market as follows.
(1) Surveillance on day ahead market
The Commission monitors on a daily basis whether any unfair trades are taking place in bidding on the JEPX day
ahead market. Through the monitoring, the Commission confirmed several mistakes in bidding. The Commission
conducted fact-finding investigations with each of these business operators and confirmed that none of them had
any intention of changing the market price. However, the Commission reminded them that strict measures could betaken if the similar bidding behavior would be repeated in the future, requested them to take thorough recurrence
prevention measures, and alerted market participants through press releases, etc. In particular, to some business
operators that have not delivered the entire surplus amount, the Commission provided written administrative
guidance for business improvement, requesting them to take thorough recurrence measures, considering thepossibility of occurrence of significant fluctuation of the actual contracted price. Through the monitoring, theCommission discovered that Chugoku Electric Power Co., Inc. had not disclosed information on output power
reduction, which was required to be disclosed in a timely manner, and had been conducting related trades in the day
ahead market. Therefore, on March 31, 2023, the Commission issued a business improvement administrative
recommendation to the company, asking them not to make high bids aimed at curbing fuel consumption without
disclosing information on output reductions.
In addition, after the verification of the sharp increase in the electricity day ahead market price occurred in thewinter of FY2020, the Commission requested general electric utilities and JERA to provide data showing that they
had supplied all available bid volume to the market, if the electricity day ahead market price became 30 yen or more
after June 29, 2021. The same confirmation results were promptly disclosed on the Commission's website.
To further enhance information disclosure, the JEPX market updated its website on February 20, 2023, enabling
viewers to check the bidding status near the contract point in more detail.
(2) Surveillance on baseload market
The baseload market was established in the JEPX market in FY2019 to promote equal footing in the accessenvironment for baseload power supply among electricity retailers and thereby revitalize retail competition, by
creating an environment in which newly entered electricity retailers due to electricity liberalization can use baseload
power supply in the same environment as retail services provided by general electricity utilities.
Based on the purpose of the baseload market, the Baseload Market Guidelines (hereinafter referred to as“Guidelines”) recommended that it is appropriate for large-scale electricity generation utilities, such as generalelectric utilities in each area, to supply the amount calculated by the Agency for Natural Resources and Energy(obligated supply amount) to the market, with the upper limit being the price based on the average cost of electricity
generation for baseload power sources (hereinafter referred to as the "supply ceiling price"). On the other hand, if
the procurement price for baseload power sources in the retail sector of large-scale electricity generation utilities isunreasonably lower than the supply price, the purpose of the baseload market may not be achieved.
From these viewpoints, the Commission monitored the details of baseload market auctions implemented to date,including whether appropriate quantities and prices had been offered and whether there had been any problematic
14

bidding actions in the fiscal year before and after the fiscal year of delivery in the base load market.
The result of monitoring of the fiscal year before the delivery fiscal year confirmed that the amount of electricity
supplied by each large-scale electricity generation utility had met the amount of electricity stipulated in the
Guidelines.
However, in calculating the supply ceiling price in the auction held in September 2022, the Commission
discovered that one of the large-scale electricity generation utilities in the East Japan area changed its estimation
method of the unit fuel cost price and increased the supply price from the previous auction. As the company did notprovide an objective and reasonable explanation regarding the timeliness of the changes, the Commission requested
this business operator to make corrections at subsequent auctions.
In fact, no impact on the contract results due to the estimate change was confirmed. Then, the correction of themethod of estimating unit fuel costs of the said business operator was duly confirmed in an auction held in November
2022.
The Commission confirmed that, except for the above estimate change, the supply ceiling price of each largescale electricity generation utility was set in accordance with the Guidelines, and that they supplied electricity to
the baseload market at a price below the supply ceiling price. However, in calculating fuel costs, they overestimatedthe price fluctuation risk, resulting in extremely high supply ceiling prices and, therefore, extremely high supply
prices.
The result of monitoring of the fiscal year after the delivery fiscal year confirmed that some large-scale electricity
generation utilities had made calculation errors in their estimated electricity generation cost. Therefore, theCommission issued warnings to these business operators. In fact, the impact of this calculation error on the supply
ceiling price was minimal and did not affect the contract results. On the other hand, no cases were identified inwhich the wholesale supply price of baseload power sources to the retail sector of a large-scale electricity generation
utilities or within its group is considered to be unreasonably lower than the price supplied to the baseload market.
As mentioned above, various issues were recognized in calculating fuel costs, such as each company had
considerable discretion, which had a large impact on supply prices, which could lead to substantial holding off themarket, and it is difficult to confirm non-discrimination between inside and outside the companies. Therefore, the79th, 80th, and 82nd Specialized Meeting for Policy Design held in November 2022, December 2022, and February
2023, respectively, studied how to reform the system. As a result, the 82nd Meeting held in February 2023
determined to submit the Commission’s proposal to the Agency for Natural Resources and Energy to introduce ascheme of ex-post facto settlement of fuel costs.
Based on the above proposal, the Working Group for Policy Review established under the Advisory Committee
for Natural Resources and Energy is discussing the matter for future market improvements.
(3) Surveillance on capacity market
The capacity market was established under the Organization for Cross-regional Coordination of Transmission
Operators (hereinafter referred to as “OCCTO”), aiming to improve the predictability of investment recovery forelectricity generation utilities, secure the balancing power necessary to make renewable energy a main power source,and deal with medium- to long-term supply shortages. In capacity market auctions, if a business operator that has
dominant power in the market (hereinafter referred to as a “market-dominant operator”) may not bid for power
supply or bid with a capacity lower than the expected capacity without a justifiable reason (hereinafter referred toas “holding off”), and bid at a price that unfairly exceeds the amount that needs to be recovered from the capacity
market to maintain the power supply (hereinafter referred to as “price gouging”), a contract price may be higher
15

than the price originally formed, increasing the amount of capacity contribution that electricity retailers must pay,
which could consequently harm the interests of electricity consumers.
From this viewpoint, based on the Tender Guidelines in the Capacity Market (hereinafter referred to as the“Capacity Market Guidelines”), the Commission monitors holding off and price gouging by market-dominantoperators. In the FY2022 Main Auction held in October 2022 (for actual supply and demand in FY2026), from thefollowing viewpoint of problematic practice, the Commission monitored the tender before and after the bid
accepting period.
• Monitoring of holding off: Based on the Capacity Market Guidelines, the Commission requested the powersources that were deemed to have the possibility of holding off to submit the list, the explanation of reasoning, andthe supporting evidence to confirm the rationality.
• Monitoring of price gouging: Based on the Capacity Market Guidelines, the Commission requested the powersources that became subject to monitoring to explain the cost calculation method and basis, such as labor costs andrepair costs that constitute the bid price, to confirm the rationality and appropriateness of bid price according to the
Capacity Market Guidelines.
The result of the monitoring showed that no problematic practice was discovered based on the Capacity Market
Guidelines, with the exception of some power supply bids submitted by JERA Co., Inc. JERA Co., Inc. informed
the Commission that the company miscalculated the revenue from other markets that could be earned by operating
the power supplies, and as a result, for some power supplies, submitted bids that exceeded the amount that would
need to be recovered from the capacity market to maintain the power supply. Therefore, on January 25, 2023, theCommission provided business improvement administrative guidance to the company. In addition, the Commission
reported the above monitoring results at the Working Group for Policy Review established under the Advisory
Committee for Natural Resources and Energy.
(4) Surveillance on inter-market manipulation
When the Tokyo Commodity Exchange (hereinafter referred to as “TOCOM”) approved the listing of electricity
futures in September 2019, the Guidelines for Proper Electric Power Trade clarified the regulations on inter-market
manipulation. Additionally, in May 2020, the European Energy Exchange (hereinafter referred to as “EEX”) started
clearing services for Japanese electricity futures trading.
Subsequently, the hikes in the day ahead market prices in the winter of FY2020 triggered the expectations forfurther utilization of electricity futures trading; the trading volume and number of participants in electricity futuresare steadily increasing.
However, in the unlikely event that day ahead market prices are manipulated to enjoy an advantage in otherelectricity-related trade such as the futures market, the distrust of the market may force participants in the day aheadmarket to withdraw from the futures market, which could result in inhibiting the activation of electricity futures
trading.
Therefore, it is becoming increasingly important for the Commission to monitor inter-market manipulation incooperation with the authorities that monitor commodity futures markets.
Under the situation, in December 2022, the Commission concluded an MoU with EEX and received futures
trading information from EEX. In addition, the 80th Specialized Meeting for Policy Design held in December 2020
reported that the Commission was receiving futures trading information from TOCOM and EEX and determined torequest the business operators participated in the futures trade at odd intervals to submit trading information thatcannot be covered by the above TOCOM/EEX report.
16

1.9.

Activation of wholesale electricity trade[Summary]

・ The Commission had requested general electric utilities and JERA Co., Inc. to take the following
measures to ensure effectiveness toward a year-round contract starting from the beginning of FY2023:(1) Clarification of negotiation schedule, (2) Creation and publication of wholesale standard menu
(template), and (3) Information blocking between electricity generation division and retail division, etc.
The Commission focused on checking the progress of these efforts and reported the results.
Furthermore, the Commission also formulated the evaluation policy for year-round wholesale contracts
with non-discrimination between inside and outside the companies.

(1) Measures to prevent unfair internal subsidy between electricity generation division and retail division
The summary of the Specialized Meeting for Transitional Regulated Electricity Tariff cited the “sustainability of
the competitive environment” as one of the factors to be considered when deciding whether to lift the transitional
regulated electricity tariff. More specifically, the meeting pointed out that if a business operator that has dominant
power in the wholesale market provides unfair internal subsidy to its internal retail division, and the retail divisionthat receives such internal subsidy engages in acts such as underselling, the distortion of competition in the retailmarket could happen, resulting in the maintenance or strengthening of the said business operator’s position in theretail market.
Furthermore, when the capacity market is introduced, it is assumed that a similar discussion may arise regarding
internal subsidies from the electricity generation division to the retail division of business operators that receive
income from capacity contributions (which may include companies other than general electric utilities and JERA
Co., Inc.)
Based on these findings, the Commission studied measures to prevent unfair internal subsidy by business
operators with dominant market power in the wholesale market. As a result, on July 1, 2020, based on the idea of
maximizing profits from electricity generation from a medium- to long-term viewpoint, the Commission requested
general electric utilities and JERA Co., Inc. to make a commitment to make rational judgments about tradeconditions of both inside and outside the company or the group to ensure indiscriminate wholesale of electricity.
The Commission also requested general electric utilities and JERA Co., Inc. to report to the Commission regarding
specific measures to ensure the implementation of their commitments.
Subsequently, by the end of July 2020, all general electric utilities and JERA Co., Inc. announced that they would
make commitments and reported on specific measures to ensure the implementation of their commitments. To checkthe progress of each company's efforts on the commitments, the Commission conducted follow-up work in the formof receiving data and explanations regarding trade prices and individual conditions inside and outside the company
and the group, of which results were reported at the Specialized Meeting for Policy Design. As a result, the meeting
pointed out several issues, such as the fact that negotiation opportunities are not necessarily secured indiscriminately
between inside and outside the company or the group, the fact that option values are not clarified and optional
17

products are not necessarily secured indiscriminately between inside and outside, and the fact that it was not clear
whether the interests of the electricity generation division are necessarily the same as the division in charge ofwholesale trade.
Based on these findings, the 71st Specialized Meeting for Policy Design held in March 2022 requested generalelectric utilities and JERA Co., Inc. to take the following measures to ensure effectiveness toward a year-roundcontract starting from the beginning of FY2023 at the latest: (1) Clarification of negotiation schedule andimplementation of indiscriminate negotiation, (2) Creation and publication of wholesale standard menu (template),and (3) Information blocking between electricity generation division and retail division and further thoroughdocumentation of internal trade, etc. The 79th Specialized Meeting for Policy Design held in November 2022
focused on checking the progress of these efforts and reported the results as follows: (1) Seven companies
announced their negotiation schedule on their website, (2) 10 companies announced their wholesale standard menu
on their website, and (3) All eight general electric utilities, which have integrated electricity generation and retailservices established internal rules regarding information blocking between the electricity generation division andretail division. The Commission clarified that it was a great step forward for many business operators to start new
efforts to ensure the effectiveness of non-discriminatory wholesaling both inside and outside the company or thegroup toward the FY2023 wholesale negotiations, and the efforts to secure transparency by some business operatorsthat adopted a tender system or broke system in which their own retail division can participate toward the FY2023
wholesale negotiations was appreciated. On the other hand, some business operators were still under consideration,and others already started efforts but did not announce the negotiation schedule or specific conditions of thewholesale standard menu. The Commission determined to confirm more details with such business operators after
the fact.
Furthermore, the 56th Electricity and Gas Basic Policy Subcommittee of the Electricity and Gas BusinessSubcommittee of the Advisory Committee for Natural Resources and Energy held in November 2022 decided that
all-time backup would be abolished sequentially starting from areas where non-discrimination has been confirmed.
In addition, in evaluating the current non-discrimination of general electric utilities and JERA Co., Inc., theCommission studied the items to check with each company and the evaluation criteria prior to follow-up work. The
83rd Specialized Meeting for Policy Design held in March 2023 discussed its evaluation policy.
As for future actions, the Commission will check and assess non-discriminatory nature of bilateral contracts forthe full year of FY2023 based on the above-mentioned assessment policy, of which examination is expected to bemade at the Specialized Meeting for Policy Design to be held in the middle of 2023. In addition, the Commission
will continue to regularly follow up on the implementation progress of the commitments of general electric utilities
and JERA Co., Inc., and study necessary actions.
(2) Selling bids at prices based on the marginal cost of all surplus electricity in the day ahead market○ Efforts in the past years⚫

Inclusion of opportunity costs in selling bids in the day ahead market
Verification of the sharp increase in the day ahead market price between December 2020 and January 2021

pointed out that it is appropriate to allow bidding that reflected opportunity cost from the viewpoint of appropriately
issuing price signals during fuel shortages.
18

The 66th Specialized Meeting for Policy Design held in October 2021 and the 67th Specialized Meeting for
Policy Design held in November 2021 discussed the matter and clarified that allowing bids that incorporated
opportunity cost policy in situations where fuel constraints were occurring or were likely to occur would have acertain need because of its expected effects of sending price signals to market participants, creating an incentive forelectricity generation utilities to bid preferentially on the day ahead market for limited supply capacity, andsuppressing the occurrence and continuation of sell-out events.
Accordingly, for trade after December 1, 2021, the Commission allowed the inclusion of opportunity cost policyin selling bids in the day ahead market. For the time being, general electric utilities and JERA Co., Inc. will newly
adopt the concept of opportunity cost, and if they reflect it in the bidding price, they will immediately submit to the
Executive Bureau of the Commission the explanation for the basis that the bidding price and quantity are appropriate.
⚫

Review of the fuel cost policy based on marginal cost
So far, the provision of all surplus electricity at marginal cost was positioned as a voluntary initiative of thegeneral electric utilities and JERA Co., Inc., and detailed setting methods and changes thereto were left to a certain
degree of discretion by each company.
At the sharp increase in the day ahead market price between December 2020 and January 2021, the market wasin a sold-out state where all of the sell bids were executed; a spiral price increase was occurring as business operators
who wanted to avoid shortage imbalances competed for the limited amount of supply in the sold-out state. The
business operators that have revised their supply price to the day ahead market from the inventory unit price to aunit price that takes into account the additional procurement unit price will be easier to procure additional fuel.
Therefore, it is believed that by allowing this, the company's cost control policy and fuel supply and demandsituation can be reflected as a price signal, creating the effect of encouraging companies to make additional
procurements.
The 66th Specialized Meeting for Policy Design in October 2021 and the 67th Specialized Meeting for Policy
Design in November 2021 discussed the matter and approved that the business operators were allowed to change
their cost control policy and reflect it on their bid prices. However, the accounting method for calculating inventories
and costs differs for each business operator. Therefore, to maintain consistency in calculations, each business
operator was requested to publish on its website the matter and start date at least one week before the start, andimmediately report and provide explanations to the Executive Bureau of the Commission after bidding.
The 68th Specialized Meeting for Policy Design held in December 2021 reviewed the fuel cost policies based on
marginal cost of Tohoku Electric Power Co., Inc., JERA Co., Inc., and The Kansai Electric Power Co., Inc. The 70th
Specialized Meeting for Policy Design held in February 2022 reviewed the same of Chugoku Electric Power Co.,
Inc. The 73rd Specialized Meeting for Policy Design held in May 2022 reviewed the same of Hokkaido ElectricPower Co., Inc. and reported that no major impact on market price was confirmed at the same time.
○ Proposals regarding the disclosure of electricity generation-related information and voluntary efforts by generalelectric utilities in the day ahead market
After the sharp increase in the day ahead market price during the FY2020 winter, the importance of disclosing
information on electricity generation and clarifying market manipulation activities was pointed out in order to19

further improve the transparency of the wholesale electricity market. Accordingly, the 377th Commission held in
July 2022 discussed the matter. As a result, the Commission concluded that the Guidelines for Proper Electric Power
Trade should be revised to position the disclosure of electricity generation results and bidding at prices based on themarginal cost of all surplus electricity in the day ahead market as follows. Pursuant to the provisions of Article 6614, Paragraph 1 of the Electricity Business Act, the Commission made a proposal to the Minister of Economy, Tradeand Industry in the same month, and the said guidelines were revised in November of the same year.
⚫ The Guidelines add the following as desirable: on electricity generation units with an approved output of
100,000 kW or more, electricity generation utilities must publish their electricity generation performance foreach unit/frame within five days after actual supply and demand through the system developed and operated bygeneral electricity transmission and distribution utilities and OCCTO, unless there is a reasonable reason not to
do so.
⚫ The Guidelines add the following regarding selling bids in the day ahead market:•

From the viewpoint of ensuring trust in the wholesale electricity market, it is desirable for business operatorsthat place bids in the day ahead market to bid for the full amount of surplus electricity at a price based on
marginal cost.

•

As long as such practice is performed in the day ahead market, the business operator does not fall under the
category of market manipulation, which executes or does not execute a trade that has a significant impact
on the market price for the purpose of manipulating the market price.

•

The business operators that are likely to have dominant market power are particularly urged to bid for thefull amount of surplus electricity at a price based on marginal cost. If such business operator supplies themarket at a price higher than the price based on marginal cost without rational reason or fails to supply thefull amount of surplus electricity to the market, such action could be an element that is strongly deemed tofall under the category of market manipulation, which executes or does not execute a trade that has asignificant impact on the market price for the purpose of manipulating market price.

•

The full amount of surplus electricity mentioned above refers to the remaining supply capacity after
subtracting the company's expected demand (the sum of the company's retail demand and the supply amountbased on bilateral contracts with other companies), reserve capacity, and bidding constraints from thecompany's supply capacity for each frame calculated at the time of bidding on the day ahead market.

•

The marginal cost mentioned above refers to the cost required to generate an additional 1 kWh of electricity.
Regarding fuel costs, additional fuel procurement costs may be considered when it becomes necessary to
procure additional fuel to meet future demand as fuel is consumed through bidding on the wholesale
electricity market and such additional procurement at the relevant price and quantity is objectively
considered reasonable. Regarding the concept of marginal cost, the price of a future electricity trade can beconsidered an opportunity cost when fuel constraints occur, an incompatible relationship exists, and thevalidity of the price and quantity can be objectively confirmed.

•

The above-mentioned business operators that may have dominant market power refer to those that have amarket share of more than 20% based on the electricity generation capacity (including the electricity
generation capacity through long-term, fixed bilateral contracts) in markets segmented by interconnectionlines with a consistently high rate of disruption, or to those that are considered to be major or pivotal
suppliers whose supply capacity is essential to meet demand, including those that have the electricity
generation capacity with a market share of more than 50% in the market defined based on whether there is20

a month in which the grid disconnection rate exceeds a certain value at least once in the past five years, forthe time being.

21

Chapter 2. Efforts in the field of electricity transmission and distribution services
2.1.

Surveillance on electricity transmission and distribution business[Summary]・ During the period from September 1, 2022, to March 31, 2023, information leakage was discovered
with general electricity transmission and distribution utilities and their affiliated deemed electricity
retailers. The Commission conducted necessary investigation and published the report on this matter,and recommended the Minister of Economy, Trade and Industry to issue business improvement orders
to the utilities.

To ensure proper electricity trade, the Commission monitored the status of operations of general electricity
transmission and distribution utilities, and provided administrative guidance if any inappropriate operation of thewheeling service provisions or violation of activity regulations was observed.
During a period from September 1, 2022 to March 31, 2023 covered by this biannual report, between the end of2022 to the beginning of 2023, at seven general electricity transmission and distribution utilities, some of theinformation regarding the customers of newly entered electricity retailers (hereinafter referred to as “new entrants”),
which were learned by the general electricity transmission and distribution utilities in connection with their wheelingsupply services and electricity quantity adjustment services, were available to the employees of their speciallyaffiliated deemed electricity retailers. The Commission's investigation revealed that such information was actuallyused by the deemed electricity retailers for active sales activities to acquire or for responding to customers. The
seven general electricity transmission and distribution utilities are Tohoku Electric Power Network Co., Inc., Chubu
Electric Power Grid Co., Inc., Kansai Transmission and Distribution Inc., Chugoku Electric Power Transmission &Distribution Co., Inc., Shikoku Electric Power Transmission & Distribution Co., Inc., Kyushu Electric Power
Transmission and Distribution Co., Inc., and the power transmission and distribution division of the Okinawa
Electric Power Co., Inc.: their specially affiliated deemed electricity retailers are Tohoku Electric Power Co., Inc.,
Chubu Electric Power Miraiz Co., Inc., the Kansai Electric Power Co., Inc., Chugoku Electric Power Co., Inc.,
Kyushu Electric Power Co., Inc., and the retail division of the Okinawa Electric Power Co., Inc. In investigating theinformation leakage, the Commission issued emergency inspection instructions to all general electricity
transmission and distribution utilities and deemed electricity retailers, and requested the business operators thatwere found to have leaked or viewed information to report the matter. In addition, the Commission conducted onsite inspection at Kansai Transmission and Distribution Co., Inc., the Kansai Electric Power Co., Inc., Kyushu
Electric Power Transmission and Distribution Co., Inc., Kyushu Electric Power Co., Inc., Chubu Electric Power
Grid Co., Inc., and Chubu Electric Power Miraiz Co., Inc., and requested these companies to establish the form toreceive information and implement other necessary measures to appropriately handle this matter.
Based on the results of these investigations, the Commission published the Report on the Leakage of Non-PublicInformation by General Transmission and Distribution Utilities dated March 31, 2023, reporting the findings
regarding this matter at each business operator, legal assessment, and the measures to be taken.
In addition, in the above report, the Commission concluded that business improvement orders should be issued
to some business operators (Kansai Transmission and Distribution Co., Inc., Kansai Electric Power Co., Inc.,
Kyushu Electric Power Transmission and Distribution Co., Inc., Kyushu Electric Power Co., Inc., and Chugoku
Electric Power Network Co., Inc.). On the same day, the Commission recommended the Minister of Economy, Tradeand Industry to issue business improvement orders to request the following to the above companies.
22⚫ The general electricity transmission and distribution utilities and the deemed electricity retailers should discussand formulate a plan to promptly eliminate the shared use of information systems related to wheelinginformation, and submit the plan to the Minister of Economy, Trade and Industry by the date specified by thesame. Kansai Transmission and Distribution Co., Inc., Kansai Electric Power Co., Inc., and Chugoku ElectricPower Network Co., Inc. should implement the plan while regularly reporting its progress to the Ministry of
Economy, Trade and Industry.
⚫ Compliance with activity regulations is a major prerequisite for business operation. To this end, it is necessary
for business operators, including all employees in the organization, to study and implement measures tofundamentally strengthen internal controls and thoroughly reform awareness within the company.
⚫ The details and causes of the cases must be investigated. The results should be publicized to society and strict
action should be taken against those involved.
2.2.

Audit of general electricity transmission and distribution utilities[Summary]

・ The Commission audited the operations and accounting of general electricity transmission anddistribution utilities and electricity transmission utilities. The Commission focused on checking of profit
and loss of wheeling services, development of system to prevent prohibited behaviors associated withwheeling supplies, and operational procedures of general provisions.

Pursuant to the provisions of Article 105 of the Electricity Business Act, the Commission conducted audits of 13
general electricity transmission and distribution utilities and electricity transmission utilities.
The FY2022 audit particularly focused on the following items.
• Every year, general electricity transmission and distribution utilities experience some accounting problems
related to transmission and distribution operations, such as miscalculations in wheeling service charges and longterm non-payment of construction cost contributions, with electricity retailers and electricity generation utilities.
Each company is currently investigating the causes and implementing recurrence prevention measures. FY2021 had
also such miscalculations in wheeling service charges and long-term non-payment of construction cost contributions
occurred. Therefore, in FY2022, the Commission continued the audits by focusing on the operational procedures ofgeneral provisions, including the progress in implementing recurrence prevention measures, from the viewpoint ofpreventing recurrence.
• On December 28, 2020, the Accounting Rules for Calculation of Profit and Loss of Electricity WheelingServices were revised to prohibit the inclusion of increased expenditures due to inappropriate orders and contracts
as expenses in calculating excess profits related to wheeling services. Upon receiving this amendment to theministerial ordinance, in auditing FY2021 profit and loss of wheeling services, the Commission confirmed whether
the excess contract amount (referring to the excess amount paid, exceeding the reasonable amount of the contract,in cases where transparency or fairness is not ensured without justifiable reason in the procedures related to thecommission or service contracts) was included in calculating the excess profit statement, together with theirinvestigation methods. As a result, the Commission confirmed the excess contract amounts and continued to focus
on the inclusion of excess contract amount in the FY2022 audit.
• Upon facing the cases of information leakage by general electricity transmission and distribution utilities, theCommission strengthened the audit of information management in the FY2022 audits related to system development.
23

2.3.

Ex-post facto assessment of profit and loss of wheeling services by general electricity

transmission and distribution utilities[Summary]

・ The Commission conducted ex-post facto assessment of profit and loss of wheeling services. After
reviewing 10 business operators subject to the assessment, the Commission submitted its report to the
Minister of Economy, Trade and Industry that none of these operators were required to apply for
approval for the revision of their wheeling service provisions. The Commission also confirmed theprogress of each company's efforts to improve management efficiency.

The business environment surrounding the grid system in Japan is undergoing major changes. While electricity
demand tends to be sluggish due to the decreasing population and advancing energy conservation, the need toaddress the aging of electricity transmission and distribution equipment that was developed during the pasteconomic growth period and the need to develop grid interconnection associated with the expanded use of renewableenergy are increasingly growing.
To maintain future wheeling supply charges to a minimum while responding to these changes in the businessenvironment, general electricity transmission and distribution utilities are required to reduce costs as much as
possible through the efforts to improve management efficiency, and make scheduled and efficient capital
investments to prepare for the expanded use and stable supply of renewable energy in the future.
With the awareness of the above issues, the 416th Commission held in February 2023, the 36th Specialized
Meeting for Tariff System held in February 2023, and the 422nd Commission held in March 2023 examined the expost facto assessment of FY2021 profit and loss of general electricity transmission and distribution utilities topromote the simultaneous pursuit of lower wheeling service charges and stable supply of high-quality electricity,
based on the request of opinions from the Minister of Economy, Trade and Industry. Based on this result, theCommission answered to the Minister of Economy, Trade and Industry that the subject 10 general electricity
transmission and distribution utilities were not required to be ordered to apply for approval for the revision ofwheeling service provisions, in light of Article 2 (15) of the Assessment Standards, etc. for Administrative Action
by the Minister of Economy, Trade and Industry based on the Electricity Business Act before being revised by the
Directive (20221021 Resources No. 3) to Partially Amend the Assessment Standards, etc. for Administrative Action
by the Minister of Economy, Trade and Industry based on the Supplementary Provisions of the Act on the Partial
Amendment of the Electricity Business Act to which the provision then in force remains applicable under theprovisions of the Supplementary Provisions (20221021 Resources No. 3) of the Assessment Standards, etc. for
Administrative Action by the Minister of Economy, Trade and Industry based on the Electricity Business Act(20000529 Resources No. 16).
2.4.

Surveillance on procurement and operational status of balancing power and study to secure

more efficiency[Summary]

・ The Specialized Meeting for Policy Design discussed and studied open procurement of balancing
power and procurement in the balancing market, and proposed the revision of the Balancing Market
Guidelines to the Minister of Economy, Trade and Industry.

24(1) Monitoring the results of open procurement of balancing power and additional supply capacity, etc.
(hereinafter referred to as "balancing power") and the operational status
The open procurement of balancing power by general electricity transmission and distribution utilities is a system
to procure cost-effective balancing power as a result of competition among electricity generation utilities, andachieve more robust balancing power for the entire electricity market. However, currently, there seems to be notmany power sources owned by companies other than general electric utilities available as balancing power.
Therefore, to improve this situation and promote more competition, transparent and appropriate open procurement,
as well as appropriate information provision to the potential bidders, should be secured to encourage and expand
electricity generation utilities and other parties to participate in bidding.
Under the situation, the Commission analyzed the results of open procurement of balancing power to monitor
whether any problems with the bidding behavior of general electricity utilities exist, and whether the operation ofbalancing power by general electricity transmission and distribution utilities is appropriate based on the capacity(kW) prices and electricity amount (kWh) prices.
The results of open procurement of balancing power and the results of monitoring the operational status werereported to the Specialized Meetings for Policy Design held from September 2022 to March 2023. The same
meetings studied the improvement measures such as clarifying the policy on the calculation method of other market
returns under the price rules of open procurement of black start function and clarifying how to raise issues regarding
the handling of fuel cost fluctuation risk in the open procurement of additional supply capacity.
(2) Surveillance on the balancing market
When general electricity transmission and distribution utilities procure the balancing power necessary to control
frequencies in their power service areas and adjust the supply and demand balance, they need to secure the balancing
power necessary for their actual operation, without giving preferential treatment to specific power sources or bearing
excessive costs.
From this viewpoint, open procurement of balancing power by general electricity transmission and distribution
utilities was implemented from 2016. In addition, based on the interim report of the Policy Subcommittee for
Implementing Electricity System Reform, designing details of the balancing market and developing an environment
where general electricity transmission and distribution utilities can procure and trade balancing power in the market
were recommended as appropriate.
Subsequently, the Working Group for Policy Study of the Agency for Natural Resources and Energy and thecommittee of OCCTO discussed the detailed design of thebalancing market. From 2021, the trading of thebalancing power responding to renewable energy forecast errors (replacement reserve for FIT or RR-FIT) and fromFY2022, the trading of the balancing power responding to demand forecast errors occurring after gate closing(replacement reserve or RR) were started.
With insufficient competition in the balancing market, business operators with dominant market power may
exercise their market power and obtain unfair profits by setting unreasonably high bid prices. The Commission,
based on the increase in the contract price of replacement reserve for FIT or RR-FIT in August 2022, requested
some members in the balancing market to report the matter in September 2022. The results of analysis and identified
issues from the reports of the market members were discussed and studied at the 78th and 79th Specialized Meetingfor Policy Design held in October and November 2022. Specifically, the meetings clarified the concept of bidding
amounts for a business operator that, in supplying ΔkW to the balancing market, reduced the output of other units
to maintain the minimum output, and participated in the bid to the balancing market including the units that had
surplus capacity due to reducing these units.
Based on these clarifications, in December 2022, the Commissions submitted a proposal to the Minister of25

Economy, Trade and Industry regarding the revision of the Balancing Market Guidelines.
In addition, to monitor operations and analyze the background of business operators' behaviors based on the
Balancing Market Guidelines, the Commission requested some members of the balancing market to report the matterin February 2022, and continued discussions and study.
2.5.

Surveillance on the operational status of the imbalance pricing system[Summary]

・ The Specialized Meeting for Policy Design started discussion and study toward unifying thecompensation fee calculation index and reserve margin for compensation imbalance charges.

Under the balancing system based on planned value, electricity retailers and electricity generation utilities are
required to formulate their own demand and generation plans for each 30-minute period, where a day is divided into
48 periods. The gap (imbalance) between these plans and actual results shall be adjusted by using power sources
openly procured by general electricity transmission and distribution utilities from electricity generation utilities(open procurement in the balancing market started from FY2021). The cost is recovered from electricity retailers
and electricity generation utilities as an imbalance charge. As above, the imbalance charge serves as a settlement
price for electricity excess or deficiency in actual supply and demand, while also serving as the basis for pricesignals in wholesale electricity trading.
From FY2022, a new imbalance fee system has been in operation, and a compensation imbalance charge isapplied in a tight supply-demand situation. To calculate the compensation imbalance charge, the compensation fee
calculation index is used. The Imbalance Charge System after FY2022 aims for the unification of the compensation
fee calculation index with the reserve margin (wide-area reserve margin) of each general electricity transmission
and distribution utilities in the future (FY2024). Therefore, the Specialized Meeting for Policy Design started
discussion and study toward unifying the compensation fee calculation index and reserve margin.
2.6.

Examination of wheeling service charges under the new wheeling service charge system(revenue cap system), establishment of the Working Group for Progress Confirmation of more efficientElectricity Transmission and Distribution, and consideration of electricity generation-side fee (Generation
charge or G-charge).
[Summary]

・ Regarding the new wheeling service charge system (revenue cap system) scheduled to be introduced
in FY2023, the Commission verified and examined documents related to revenue projections andwheeling service supply provision submitted by general electricity transmission and distribution utilities.

・ Based on the decision to introduce an electricity generation-side fee in FY2024, the Specialized
Meeting for Policy Design discussed and studied in preparation for its introduction.

(1) Examination of wheeling service charges under the new wheeling service charge system
The 201st Ordinary Session of the Diet enacted the Act on the Partial Amendment of the Electricity Business Act
to Establish a Resilient and Sustainable Electricity Supply System, introducing a new wheeling service charge
26system (revenue cap system that periodically approves the upper limit of income and sets the wheeling service
charges within that range) from 2023.
Regarding the detailed design of the new wheeling service charge system, it was agreed that active involvementof committees with expert knowledge was required through examination of wheeling service charges and ex-post
facto evaluation. From this viewpoint, in July 2020, the Sustainable Electricity System Development Subcommitteeof the Advisory Committee for Natural Resources and Energy decided that the Commission and the Agency for
Natural Resources and Energy should work together on this matter. Based on this, the Specialized Meeting for Fee
Examination, which was established to examine retail electricity regulated tariff based on transitional measures andwheeling service charges, was reorganized into the Specialized Meeting for Tariff System, and started discussions
on the detailed design of the wheeling service charge system from July 2020. In addition, in January 2021, theWorking Group for Tariff System was established under the Specialized Meeting for Tariff System to discuss highly
specialized and detailed issues, and has been conducting discussions. A total of eight Special Meetings for Tariff
System and a total of six Working Groups for Tariff Systems were held to complete the detailed study on the policy
design and compile an interim report by November 2021. Afterwards, the Specialized Meeting for Tariff System
continued discussion on the issues for continued discussion and draft guidelines regarding the system.
Based on the promulgation of the Ministerial Ordinance Concerning Revenue Outlook for Wheeling Service
Supply by General Electricity Transmission and Distribution Utilities in July 2020, each general electricity
transmission and distribution utilities submitted documents related to their revenue projections under the newrevenue cap system to the Agency for Natural Resources and Energy. Upon receiving the request for unreserved
opinions from the Agency for Natural Resources and energy, the 14th Specialized Meeting for Tariff System heldin July 2020 started necessary verification on the related documents. The Commission continued the discussion on
the matter for a total of 14 meetings up to the 27th Specialized Meeting for Tariff System held in November 2022.
During a period from September 2022 to March 2023 covered by this biannual report, a total of 10 meetings, fromthe 18th to 27th Specialized Meetings, were held.
General electricity transmission and distribution utilities, based on the above discussions and the enforcement of
the Government Order Setting the Partial Enforcement Date of the Act on the Partial Amendment of the Electricity
Business Act to Establish a Resilient and Sustainable Electricity Supply System, calculated their appropriate revenue
projections again, and submitted their applications for approval of revenue projections to the Minister of Economy,
Trade and Industry in December 2022. Upon receiving a request for opinions from the Minister of Economy, Tradeand Industry, the 29th Specialized Meeting for Tariff System examined the details of the applications for approvalin December 2022. In addition to the verifications of the previous Specialized Meeting for Tariff System, theCommission conducted a strict examination to confirm whether the applications conformed with the opinions
submitted to the Minister of Economy, Trade and Industry from the Minister of State for Special Missions(Consumer and Food Safety) on November 29, 2022, and the Specialized Meeting’s comments on the above
opinions clarified at the 28th Specialized Meeting for Tariff Systems held in December 2022. The Commission
reported the results to the Minister of Economy, Trade and Industry, and based on the results, these revenue
projections were approved in December 2022.
Thereafter, the general electricity transmission and distribution utilities established the wheel service provisions
based on the approved revenue projections and submitted the applications for approval to the Minister of Economy,
Trade and Industry in December 2022. Upon receiving the request for opinion on the applications for approval from
the Minister of Economy, Trade and Industry, the 31st and 32nd Specialized Meeting for Tariff System held inJanuary 2023 conducted strict examinations. Based on the above submitted answer, the Minister of Industry, theMinister of Economy, Trade and Industry approved the wheeling service provisions in January 2022.

27

(2) Establishment of the Working Group for Progress Confirmation of more efficient Electricity
Transmission and Distribution
With the introduction of a new wheeling service charge system, general electricity transmission and distribution
utilities were required to steadily implement business plans, including efficiency plans, of which achievement status
was an important assessment item under this system. Therefore, to confirm whether general electricity transmission
and distribution utilities were making progress toward improving management efficiency as they moved forwardwith their investment plans, the Commission determined to establish the Working Group for Progress Confirmationof more efficient Electricity Transmission and Distribution under the Specialized Meeting for Tariff System inJanuary 2023.
(3) Consideration of electricity generation-side fee
It was necessary to use and strengthen the grid more efficiently and reliably toward the expanded introduction ofrenewable energy. Therefore, with respect to the costs necessary to maintain and expand electricity transmission
and distribution facilities, which were entirely borne by electricity retailers under the current system, theCommission had been discussing the introduction of the electricity generation-side fee, which requires electricity
generation utilities, who were also using the grid just like consumers, to bear a portion of the costs, thereby making
the costs more fairly shared.
The Sixth Strategic Energy Plan, approved by the Cabinet in October 2021, stated that the consideration ofelectricity generation-side fee, including its necessity, should be continued.
Based on the situation, the 38th Subcommittee on Mass Introduction of Renewable Energy and Next Generation
Electricity Networks, Energy Conservation and New Energy Subcommittee/Electricity and Gas BusinessSubcommittee, Advisory Committee for Natural Resources and Energy, held in December 2021, concluded that itwas necessary to reconsider how to charge the electricity generation-side fee for renewable energy power sources
and how to adjust the share, and how to ideally recover the cost through renewable energy levies and a new wheelingservice charge system toward stable and reliable recovery of electricity transmission and distribution-related costs,
thus postponing the introduction of the electricity generation-side fee in FY2023. Instead, with FY2024 in mind,
the Subcommittee advanced the discussions at the related committees on how to recover costs related to powertransmission and distribution, including electricity generation-side charges, to be concluded by the end of FY2022,with the aim of realizing the system as early as possible.
Based on the above situation, consideration for the smooth introduction of the electricity generation-side fee wascontinued. The 47th Subcommittee on Mass Introduction of Renewable Energy and Next Generation Electricity
Networks, Energy Conservation and New Energy Subcommittee/Electricity and Gas Business Subcommittee,
Advisory Committee for Natural Resources and Energy, held in December 2022, concluded that the already certified
FIT/FIP (*including the cases that were won in the bidding in the fiscal year before the introduction of electricity
generation-side fee) would be subject to the electricity generation-side fee after the end of procurement period, new
FIT/FIP would be considered based on the calculation of the procurement prices, and non-FIT/post-FIT would
promote business ingenuity (bilateral contracts, etc.) and ensures smooth reflection of fees. In addition, it isdetermined that the pumped-storage electricity generation and storage batteries would be waived from the charging
per kWh, from the viewpoint of fairness with other power sources, considering the impact of the electricity
generation-side fees on the resulted electricity charges through such power sources. In addition, in February 2023,
the Electricity and Gas Basic Policy Subcommittee, Electricity and Gas Business Subcommittee, Advisory
Committee for Natural Resources and Energy, issued the Interim Report on the Future Direction of Electricity Policy,
which decided to introduce the electricity generation-side fee in FY2024.

28

Chapter 3. Efforts to ensure fair trade in the retail and wholesale gas trade
3.1.

Qualification screening for registration of gas retailers[Summary]

・ As a result of screening by the Commission for registration of gas retailers, up until the end of March
2023, 1,360 gas retailers were registered.

When the Minister of Economy, Trade and Industry intends to register gas retailers, the Minister is required tohear the opinions of the Commission. The Commission, upon receiving the request for opinions from the Ministerof Economy, Trade and Industry, conducted the qualification screening from the viewpoint of whether the applicants
do not fall under the registration refusal requirements stipulated in the Gas Business Act (from the viewpoint of theprotection of the interest of gas consumers) and shared the results with the Minister of Economy, Trade and Industry.
As a result of the screening, up until the end of March 2023, 1,360 gas retailers were registered.
3.2.

Publication of the Gas Trading Report[Summary]

・ The Commission collected information necessary to surveil retail gas trade from gas industry utilities
and published the results every month.

The Commission, according to the Gas-Related Reporting Rules (Ministry of International Trade and Industry
Ordinance No. 16 of 2017), has regularly received information report necessary to surveil retail gas trade from gas
industry utilities. A part of the information received in these reports, such as the amount of gas sales, was publishedevery month.

3.3.

Provision of consultation services[Summary]

・ The Commission established a consultation desk (information provision desk) to provide advice toconsumers regarding problems when concluding a retail supply contract, receive information regarding
possible legal violations by business operators, and provide administrative guidance, if necessary.

The Commission established a consultation desk to respond to inquiries received from gas customers andprovided answers and advice to questions. During a period from September 2022 to March 2023, a total of 273
inquiries were received.
Through these services, if any information on inappropriate business activities was detected, the Commission
investigated the facts and provided administrative guidance to the concerned gas retailers, if necessary.
29

○ Trends in the number of inquiries (gas) to the consultation desk and examples
Trends in the number of inquiries to the consultation
desk regarding gas(Cases)● I signed a contract for both electricity and gas at the same time,
but the gas contract document has not been issued.

3.4.

Jan - Mar 2023

Jul - Sep 2022

Oct - Dec 2022

Apr - Jun 2022

Jan - Mar 2022

Jul - Sep 2021

Oct - Dec 2021

Apr - Jun 2021

Jan - Mar 2021

Jul - Sep 2020

Oct - Dec 2020

Apr - Jun 2020

Jan - Mar 2020

Jul - Sep 2019

Oct - Dec 2019

Apr - Jun 2019

Jan - Mar 2019

Jul - Sep 2018

Oct - Dec 2018

Apr - Jun 2018

Jan - Mar 2018

Jul - Sep 2017

Oct - Dec 2017

Apr - Jun 2017

Jan - Mar 2017

Oct - Dec 2016

⇒ Under the Gas Business Act, the business operator is required todeliver a document after signing the contract. However, if thecontractor agrees, such information may be provided via email
or your account page on the business operator's website. If you
do not find the document at hand, please contact yourcontracted company.
● I don't know which gas company I have contracted with.
⇒ Please check if you have received your gas meter reading slip,
email, or postal mail from a gas company. Checking yourpayment history for bank transfers or credit cards may help you
find your gas company.

Surveillance on retail trade[Summary]

・ The Commission provided administrative guidance to business operators that engaged in problematic
practices under the Gas Business Act regarding retail gas sales.

In April 2017, entry into the retail gas business was fully liberalized, allowing any consumer, including
households, to freely choose their gas company and rate structure. Under the situation, to optimize the retail gas
supply trade, the Commission, based on the "Guidelines for Retail Gas Business," monitors the activities ofbusiness operators, regarding the provision of information to consumers and the contractual form and coverage,
including provision of administrative guidance to the operators who engaged in problematic practices under theGas Business Act.
The specific examples of administrative guidance provided during a period from September 2022 to March 2023
are as follows.
〇 Administrative guidance
From around September 2022 to January 2023, Company B, which is a distributor for Gas Retailer Company A,
posted on Company B's website that Company A provided retail supplies and Company B acted as anintermediary business to conclude gas retail supply contracts with consumers. However, the tariff advertised on
the website was different from the actual situation. In addition, Company A did not provide appropriate guidanceor supervision to Company B regarding such advertisement. These actions may hinder the formation ofunderstanding among consumers regarding the supply conditions related to Company A's retail gas supply.
Therefore, the Commission provided administrative guidance to Company A and Company B to execute propergas retail and establish the necessary system to ensure the credibility and accuracy of the advertised details.

30

3.5.

Audit of deemed general gas retailers[Summary]

・ The Commission audited the operations and accounting of deemed general gas retailers.
When the retail gas market was fully liberalized in April 2017, a regulated retail tariff (transitional regulated
tariff) was allowed to continue in the area where competition was recognized as insufficient.
Pursuant to the provisions of Article 45-2 of the Gas Business Act before revision based on the provisions ofArticle 5 of the Act on the Partial Amendment of the Electricity Business Act (Act No. 47 of 2015; hereinafterreferred to as the "Revised Act"), which was still deemed effective pursuant to the provisions of Article 22,
Paragraph 4 of the Supplementary Provisions of the same act, the Committee audited four deemed gas retailers thatwere subject to the transitional measures for a regulated tariff.
3.6.
Ex-post facto assessment of retail gas regulated tariff based on transitional measures after theend of the cost calculation period[Summary]

・ The Commission conducted ex-post facto assessments of retail gas regulated tariff based ontransitional measures after the end of cost calculation period. As a result, the Commission submitted
its opinion to the Minister of Economy, Trade and Industry, stating that none of four companies subject
to audit were required to apply for approval for price revision.

・ The result of special follow-up gas monitoring showed that no business operators that were subject towritten administrative guidance for a period from September 2022 to March 2023.

(1) Ex-post facto assessment of retail gas regulated tariff based on transitional measures after the end of the costcalculation period
The Ministry of Economy, Trade and Industry is authorized to conduct ex-post facto assessment of retail gas
regulated tariff based on transitional measures in the Supplementary Provisions of the Act on the Partial Amendmentof the Gas Business Act for every fiscal year after the end of the cost calculation period to check needlessly affluent
profit margins and to release the results to the public.
Upon receiving the request for opinions from the Minister of Economy, Trade and Industry, and the Directors ofregional bureaus of the Ministry of Economy, Trade and Industry in October 2022, the 25th Specialized Meeting
for Tariff System held in November 2022 conducted ex-post facto assessment and checking over three deemed gas
retailers whose cost calculation period had ended (Toho Gas Co., Ltd., Nippon Gas Co., Ltd., and Nankai Gas Co.,
Ltd.) based on Article 2 (8) 4 of the Assessment Standards., etc. for Administrative Action by the Minister of
Economy, Trade and Industry (20170329, Resources No. 5; hereinafter referred to as “Assessment Standards”)
based on the Supplementary Provisions of the Act on the Partial Amendment of the Electricity Business Act. As aresult, the Commission concluded that the three deemed gas retailers subject to ex-post facto assessment this time
were not required to apply for approval for the reduction of current tariff (Reference: Figure 5: Results of applying
the Assessment Standards).
Based on the above, in November 2022, the Commission submitted its opinion to the Minister of Economy, Tradeand Industry, and the Director-generals of competent regional bureaus of the Ministry of Economy, Trade andIndustry, stating that no operators were required to apply for approval for the reduction of retail gas regulated tariffbased on transitional measures, in light of Article 2 (8) 4 of the Assessment Standards.
31

○ Discussion summary of the Specialized Meeting for Tariff System (November 2022)
Figure 5: Results of applying the Assessment Standards

・ As a result of examination based on the Assessment Standards, the Commission concluded thatthree deemed gas retailers (other than Atami Gas*1) that had not revised their tariffs after the endof the cost calculation period were not subject to the consideration of issuing an order for them toapply for approval for price revision.
*1: Atami Gas was not subject to ex-post facto assessment, because its cost calculation period (from January 2022 to December 2024) has not ended.
(Unit: million yen)
Under control of the
Ministry

Results of examination based on theAssessment Standards

Under control of (and assessment by) each competent regional bureauof the Ministry of Economy, Trade and Industry

Account settlement inMarch

Account settlement inMarch

Account settlement inMarch

Toho Gas

Nippon Gas

Nankai Gas(Kanto and Nanpeidai areas)

4 companies

A. Criteria based on profit ratio of regulated sectors of gas business
Average for 3 fiscal years (1) *2
Step 1
Average of 4 companies for 10 fiscal years (2)Does the figure exceed the average of 4 companies
for 10 fiscal years? [i.e., (1) > (2)]?
ResultIs the company subject to the issuing of an orderfor it to apply for approval for price revision?

*2: Simple average of profit ratio of regulated sectors of gas business of each year
(Source: Prepared by the Executive Bureau of the Commission based on the interviews andthe departmental statement of income and expenditure of each business operator)(Overall results)
Step 1 of the Assessment Standards [criteria based on profit ratio of gas business] showed thatno companies had the average profit ratio for the last three fiscal years exceeding the average
profit ratio of four companies for 10 fiscal years.
As a result of examination based on the Assessment Standards as above, the Commission
concluded that three deemed gas retailers (other than Atami Gas) that had not revised theirtariffs after the end of the cost calculation period were not subject to the consideration of issuingan order for them to apply for approval for price revision.
(Conclusions)
Based on the above, the Commission concluded that the deemed gas retailers subject to ex-post
facto assessment this time were not required to apply for approval for the reduction of current tariff.

(2) Special follow-up monitoring on gas retail priceThe 29th Subcommittee for Gas System Reform, Subcommittee for Basic Policy, Advisory Committee for
Natural Resources and Energy, held in February 2016, clarified that among gas retailers that were not subject totransitional measures for regulated gas retail tariff or for which transitional measures for regulated gas retail tariff
were lifted, the business operators whose city gas or community gas utilization rate exceeded 50% in their former
service areas would be monitored for their rate levels (gas rate based on the monthly gas consumption of a standard
household) in the relevant service area for three years as a special follow-up monitoring to prevent unreasonable
increases in retail gas rates.
Based on the above clarification, the Commission regularly receives reports from these business operators on
their standard retail tariff for households to check the status of retail tariff revisions. The results showed that nobusiness operators were subject to written administrative guidance for a period from September 2022 to March 2023.

32

3.7.

Follow-up on gas wholesale commitment[Summary]

・ Based on the results of follow-up with the three major gas companies regarding compliance with theircommitments, the Commission requested the companies to take appropriate measures.

After the full liberalization of the gas retail market in April 2017, gas retailers were free to set their tariff inprinciple. However, in service areas designated by the Minister of Economy, Trade and Industry (designation offormer specified service areas), where a particularly strong need existed to protect the interests of consumers,
transitional measures for regulated retail tariffs were maintained.
In August 2020, it was confirmed that Tokyo Gas Co., Ltd., Osaka Gas Co., Ltd., and Toho Gas Co., Ltd.
(hereinafter referred to as the "three major companies") partially met the criteria for lifting the transitional regulated
tariff regulations. Then, in November 2020, the Minister of Economy, Trade and Industry requested theCommission's opinion on the cancellation of the designation of former specified service areas with transitional
measures for regulated retail tariffs for the three major companies.
As a result of discussion, the Commission recommended that the following commitments be expressed by thethree major companies to cancel the designation of the specified former service areas with transitional measures forregulated retail tariff.
• If the company received a request from other business operators to outsource work related to gas production(including work related to part of processes such as heat adjustment and odor addition; the same shall apply
hereinafter), the company shall accept it unless there was an unavoidable reason to do so, such as lack of equipment
capacity. In particular, if a business operator that has already concluded an outsourcing contract with the company
for the operations related to gas production wishes to continue the operations, the company shall continue to do sounless there is an unavoidable reason.
• If the company receives a request from other business operators to receive wholesale gas supply, the company
shall do so unless there was an unavoidable reason to do so, such as lack of supply capacity.
• Regarding Start-up Wholesales, the company shall understand the purpose of the system, i.e., to support new
entrants by developing an environment in which new entrants can procure city gas at a price level that can ensurecompetitiveness with the retail business of former deemed gas retailers, and actively work to improve the utilizationof the system by new entrants. In this regard, when setting the wholesale price, the company shall understand theprinciple of stipulation that requires individual wholesale price negotiation between wholesalers and user business
operators at a price under the upper limit wholesale price calculated by deducting certain expenses from the lowest
retail tariff of a standard menu of former deemed gas retailers, and shall respond to the request and negotiate in goodfaith with other business operators.
In January 2021, the Commission submitted its answer to the Minister of Economy, Trade and Industry, statingthat as for the above examination results, these commitments should be expressed by the three major companies
prior to lifting the transitional measures for regulated retail tariff. Then, in February 2021, the three major companies
expressed their commitments. In October 2021, transitional measures for regulated tariffs were lifted for Tokyo Gas
Co., Ltd. and Osaka Gas Co., Ltd. Lifting of the measure for Toho Gas Co., Ltd. shall be discussed after thedisclosure of an investigation undergoing by the Fair Trade Commission regarding their gas trade.
The Commission conducts a follow-up examination once a year to check whether the three major companies arecomplying with their commitments. For a period from September 2022 to March 2023, based on the follow-up
results, the Commission requested business operators to take appropriate actions in wholesale trade negotiations if
there was a suspected violation of commitment.
33

Chapter 4. Efforts in the field of gas pipeline services
4.1.

Surveillance on general gas pipeline service providers and specified gas pipeline service

providers[Summary]

・ The monitoring of operations of general gas pipeline service providers and specified gas pipeline
service providers for a period between September 1, 2022 to March 31, 2023, discovered no casesthat would lead to administrative recommendation for business improvement.

To ensure proper gas trade, the Commission monitored the status of operations of general gas pipeline service
providers and specified gas pipeline service providers, and provided administrative guidance if any inappropriate
operation of the transportation service provisions was observed.
The monitoring of operations of general gas pipeline service providers and specified gas pipeline service
providers for a period between September 1, 2022 to March 31, 2023, discovered no cases that would lead toadministrative recommendation for business improvement.
4.2. Audit of general gas pipeline service providers[Summary]

・ The Commission audited the operations and accounting of general gas pipeline service providers,specified gas pipeline service providers, and gas manufacturers. The Commission focused on
checking of profit and loss of gas transportation services and prohibited behaviors associated withtransportation services.

Pursuant to the provisions of Article 170 of the Gas Business Act, the Commission conducted audits of 257
general gas pipeline service providers, specified gas pipeline service providers, and gas manufacturers (hereinaftercollectively referred to as “general gas pipeline service providers, etc.”).
The FY2022 audit particularly focused on the following items.
• The FY2021 audit showed the decreased number of items requiring correction compared to the last year. However,
the audit still found 80 items requiring correction due to misunderstanding of ministerial ordinance or errors incalculation of allocated cost by the companies both under control of the central government and regional bureau.
Therefore, the FY2022 audit continued to focus on the correctness of the profit and loss of transportation services
to eliminate errors in calculation of allocated cost associated with transportation services.
• From April 2022, general gas pipeline service providers over a certain size were required to be split into several
companies, and all general gas pipeline service providers and specified gas pipeline service providers wererequired to develop a system based on activity regulations. In addition, as parent companies were then prohibitedto demand discriminatory treatment to their affiliated general gas pipeline service providers or specified gas
pipeline service providers, the Commission focused on the prohibited behaviors and system development
associated with transportation services, including appropriate implementation of above provisions.
34

4.3.

Ex-post facto assessment of profit and loss of transportation services by general gas pipeline

service providers[Summary]

・ The Commissions conducted an ex-post facto assessment of FY2022 profit and loss of transportation
services of gas pipeline service providers and confirmed that the accumulated excess profits of thefour companies as of the end of FY2021 exceeded a certain amount, which was the criterion for
issuing administrative change orders. The Commissions also confirmed that the discrepancy rate
between the expected unit price and the actual unit price of three companies as of the end of FY2021
exceeded minus 5%, which was the criterion for issuing an administrative change order. Therefore,
the Commission conducted additional analysis and assessment of the details of tariff revisionnotification of the business operators that exceeded the criterion.

General gas pipeline service providers and specified gas pipeline service providers (excluding those approved by
the Minister of Economy, Trade and Industry as not requiring to establish the transportation service provisions;
hereinafter in this item referred to as "gas pipeline service providers") are required to prepare and publish their profit
and loss statement of transportation services every fiscal year. If the accumulated excess profit exceeds a certain
amount or if the deviation rate exceeds minus 5%, the Minister of Economy, Trade and Industry can order them toapply for a price reduction in transportation services. Therefore, on October 31, 2022, the Minister of Economy,
Trade and Industry, and on October 27, 2022, the Directors of competent regional bureaus of the Ministry of
Economy, Trade and Industry, requested the Commission to provide its opinion on the FY2021 profit and loss ofthe gas pipeline service providers. Upon receiving the requests, the Commission through its Specialized Meeting
for Tariff System conducted statutory ex-post facto assessment (stock management and flow management) andadditional analysis and assessment, and compiled the results in March 2023.
As a result, four of the 147 companies subject to the ex-post facto assessment (Sennan Gas Co., Ltd., ENEOSLNG Service Co., Ltd., Inuyama Gas Co., Ltd., and Chubu Electric Power Miraiz Co., Inc.) had their accumulated
excess profits as of the end of FY2021 exceed a certain amount that is the criterion for issuing an administrativechange order. In addition, three companies (Hiroshima Gas Co., Ltd., Fukuyama Gas Co., Ltd., and Yamaguchi
Gohdoh Gas Co., Ltd.) had their discrepancy rate between the expected unit price and the actual unit price as of theend of FY2021 exceeded minus 5%, which was the criterion for issuing an administrative change order. Amongthese companies, three companies (Hiroshima Gas Co., Ltd., Fukuyama Gas Co., Ltd., and Yamaguchi Gohdoh Gas
Co., Ltd.) that had their discrepancy rate between the expected unit price and the actual unit price as of the end of
FY2021 exceeded minus 5%, which was the criterion for issuing an administrative change order, provided
reasonable explanations regarding the appropriateness for them to maintain the current transportation service
contract rates. The Commission submitted its opinion to the Minister of Economy, Trade and Industry and thecompetent Directors of regional bureaus of the Ministry of Economy, Trade and Industry, stating that it wasappropriate to issue administrative change orders from the competent office to the business operators other than theabove three companies, if they would not submit notifications of price revision in their transportation service
provisions by the specified date.
Subsequently, the Commission confirmed that business operators whose price revision date was set at the end of
December 2022 had submitted notifications of transportation service charge revisions.
35

Chapter 5. Efforts in heat supply business[Summary]

・ As a result of screening by the Commission for registration of heat supply operators, up until the endof March 2023, 76 heat supply operators were registered in 136 areas.

1.

Qualification screening for registration of heat supply operators
When the Minister of Economy, Trade and Industry intends to register heat supply operators, the Minister isrequired to hear the opinions of the Commission. The Commission, upon receiving the request for opinions from
the Minister of Economy, Trade and Industry, conducted the qualification screening from the viewpoint of whether
the applicants do not fall under the registration refusal requirements stipulated in the Heat Supply Business Act(from the viewpoint of the securing the daily life of heat supply receivers or convenience for business activities)
and shared the results with the Minister of Economy, Trade and Industry. As a result of the screening, up until theend of March 2023, 76 heat supply operators were registered in 136 areas.
2.

Designation of heat supply service area as the specified service area
Of the service areas operated by the above heat supply operators, the Minister of Economy, Trade and Industry

designated 17 service areas of 13 operators as specified service areas, in which it is recognized as highly
necessary to protect the interests of heat supply recipients within the relevant service area because of theirdifficulty in selecting other heat source equipment to replace the current heat supply. For a period from September
2022 to March 2023, there were no changes to the designation areas.

36Chapter 6. Public relations, dispute resolution, etc.
6.1.

Public relations and consumer protections[Summary]

・ The Commission actively advertised and publicized market liberalization through its website andother means and also made efforts to strengthen consumer protection by publishing examples ofconsultation received from consumers and advice on them.

Even after starting the full liberalization of the electricity retail market, it is important for consumers to haveaccurate information so that they can make appropriate choices that suit their needs without getting into trouble.
With this awareness in mind, the Commission has been actively advertising and promoting liberalization throughits website and other means.
In addition, continuing from last year, the Commission and the National Consumer Affairs Center of Japan jointly
worked to strengthen consumer protection by publishing examples of consultation received from consumers andadvice on them.
Furthermore, as mentioned earlier, the Commission has set up a consultation desk to respond to consumers’
inquiries regarding problems related to concluding retail supply contracts. The number of consultations from
September 2022 to March 2023 was 3,631, including electricity and gas.
6.2.

International cooperation[Summary]

・ The Commission cooperated with overseas energy regulatory bodies to exchange opinions andcollect information.

The Commission, in cooperation with overseas energy regulatory bodies, collect information on the world's
energy markets and systems.
In September 2022, the Insight Seminar of the Asia Pacific Energy Regulators Forum (hereinafter referred to as“APER”) was held online to exchange opinions and collect information on the energy conversion efforts of eachcountry. In addition, the Commission plans to participate in the Regulatory Energy Transition Accelerator, aninternational initiative to facilitate information exchange by national and regional energy regulatory bodies toward
accelerated decarbonization, launched in November 2021. The Commission conducted preparatory research toparticipate in its workshop.

37

6.3.

Dispute resolution[Summary]

・ The Commission received no requests for mediation or arbitration, and complaints.
1.

Mediation and arbitration

Pursuant to the provisions of the Electricity Business Act, the Commission is required to mediate and arbitrate
contracts related to electricity transactions when requested, unless the request has an improper purpose.
Similarly, pursuant to the provisions of the Gas Business Act and the Heat Supply Business Act, theCommission is required to mediate and arbitrate contracts related to gas trade and wholesale heat supply.
Dispute resolution shall be conducted mainly by the mediation commissioners and the arbitrationcommissioners. Mediation commissioners and arbitration commissioners are appointed for each case from among
the commission members and other personnel designated in advance by the Commissions (Article 35, Paragraph
3 and Article 36, Paragraph 3 of the Electricity Business Act). As of March 31, 2023, the candidates for mediationcommissioners and arbitration commissioners are as follows.
(Commissioners)• Yumiko Iwafune, Ph.D

Project Professor, Institute of Industrial Science, the University of Tokyo• Kaeko Kitamoto Certified Public Accountant• Kuninobu Takeda, Ph.D

Professor, Dean of the Department of Law and Political Science and the Graduate

School of Law and Politics, Osaka University• Masanori Maruo Managing Director, SMBC Nikko Securities Inc.
(Special commissioners)• Ryuichi Inagaki, Lawyer

Ryuichi Inagaki Law Office• Ryoichi Komiyama

Professor, Graduate School of Engineering, the University of Tokyo• Makoto Tanaka

Professor, National Graduate Institute for Policy Studies• Azusa Tsutsumi

Certified Public Accountant• Kayo Nishikawa Professor, Graduate School of International Social Sciences, Yokohama National University• Yasuhiro Hayashi Professor, School of Advanced Science and Engineering, Waseda University
For a period between September 2022 and March 2023, the Commission received no requests for mediation or
arbitration.

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