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Agency for Natural Resources and EnergyCabinet Decision on the Bill for the Act for Partial Revision of the Electricity Business Act

On February 28, 2014, the Cabinet decided to approve the Bill for the Act for Partial Revision of the Electricity Business Act, and the bill will be submitted to the 186th ordinary session of the Diet.

The bill was formulated aiming to set the measures necessary for carrying out an initiative called “fully liberalizing the electricity retail market into which retail entities are able to enter,” one of the three pillars focused on in the Electricity System Reform.

1. Purpose of the bill

On April 2, 2013, the Cabinet of the Government of Japan decided to approve the Policy on Electricity System Reform (hereinafter referred to as the “Policy”), concerning the whole picture of the reform. Based on this decision, Japan stipulated the Reform Program under the supplementary provisions of the Act for Partial Revision of the Electricity Business Act (Act No. 74 of 2013), which was passed by the Diet in November 2013.

The Reform Program sets the goals of the reform as follows:
1) Securing a stable supply of electricity,
2) Suppressing electricity rates to the maximum extent possible, and
3) Expanding choices for consumers and business opportunities.

To achieve these goals, the reform will be advanced, focusing on the following three pillars:
1) Expanding the Cross-regional Coordination of Transmission Operators,
2) Full retail and generation competition, and
3) Further ensuring neutrality in the transmission/distribution sector through the legal unbundling.

In light of the program, the bill aims to revise the Electricity Business Act in the second phase of the reform so as to formulate measures required for full retail competition, and those for securing a stable supply of electricity as well as for protecting consumers.

  Schedule for implementing the measures Schedule for submitting the bill
1st phase:
Establishing the Organization for Cross-regional Coordination of Transmission Operators (OCCTO)
Planned to be established in about 2015 Enacted on November 13, 2013
2nd phase:
Full retail competition
Planned to be implemented in about 2016 Plan to submit to the ordinary Diet session in 2014
3rd phase:
Further securing the neutrality of the transmission/distribution sector through legal unbundling
Planned to be implemented by about 2018–2020 Aim to submit the bill to the ordinary Diet session in 2015.

2. Outline of the bill

Major measures in the bill are as follows:

Measures related to the Electricity Business Act

1) Full retail competition

  1. Eliminating the regulations (regional monopoly) for entering the retail market;
  2. Reviewing the categories of electricity businesses in line with liberalization and shifting to such regulation systems that are appropriate for the business categories of power generation, transmission and distribution, and retail

2) Measures for securing a stable supply of electricity

  1. Requiring general transmission/distribution companies to maintain frequency
  2. Requiring such companies to build and maintain transmission and distribution networks
  3. Requesting such companies to guarantee electricity supply with provision for the Last Resort Service as well as equal the electricity rates in isolated islands.
    (In the system, such companies are able to ensure the cost for investment in the networks by permitting regional monopoly and tariff regulations, aiming to ensure that they carry out the above measures)
  4. Requiring retailers to secure a supply power
  5. Creating a power bidding system by the OCCTO

3) Measures for protecting consumers

  1. Temporarily requiring, as an interim measure, the existing general electricity utilities to provide small electricity consumers with electricity, while continuing the current tariff regulation
  2. Requiring retailers to explain the details of contracts to consumers when making contracts

4) Other revised matters related to the Electricity Business Act

  1. Allowing the existing general electricity utilities to continue issuing their secured bonds with a statutory lien
  2. Eliminating the regulations concerning the wholesaling of electricity to the existing general electricity utilities, e.g., business license systems and tariff regulations
  3. Securing appropriateness of trades at the wholesale power exchange market
  4. Streamlining the safety regulations concerning electric facilities, which have been installed in a patternized manner
  5. Revising the related acts in line with the revision of the Electricity Business Act

Measure related to the Bill on Special Measures Concerning Procurement of Renewable Energy Sourced Electricity by Electric Utilities

In line with the revision of the business categories under the Electricity Business Act, retailers are also obliged to purchase renewable energy sourced electricity same as general electricity utilities under the current system

Measure related to the Commodity Derivatives Act

Adding the term “electricity” to the Act as a commodity to be traded in order to cover electricity in future transactions

Release Date

February 28, 2014

Division in Charge

Electricity Market Reform Office, Policy Planning Division, Electricity and Gas Industry Department, Agency for Natural Resources and Energy

Related Information

Electricity System Reform

Ministry of Economy, Trade and Industry
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