Japan power trading set to surge again from April -official

Okinawa Electric Power

09/02/2017 03:49

* Big utilities free up power from bilateral contracts for 
JEPX 
    * JEPX trading to account for 15 pct of power demand by 2018 
    * Japan power trading likely to grow several times in 2 
years 
 
    By Osamu Tsukimori and Aaron Sheldrick 
    TOKYO, Feb 9 (Reuters) - Trading on Japan's power exchange 
is set to triple in the financial year starting on April 1 as 
the nation's giant utilities aim to put around 10 percent of 
their sales up for competitive bidding, the next big step in 
reform of the sector.  
    Already 10 months into a shake-up of the country's power 
industry that opened it to independent electricity producers and 
suppliers, trading on the Japan Electric Power Exchange (JEPX) 
has surged around 50 percent and nine former regional power 
monopolies have lost nearly 2.6 million customers.  urn:newsml:reuters.com:*:nL4N1FT030 
    Hundreds of new entrants - gas utilities, manufacturers, 
trading companies, oil refiners and others - have piled in, 
buying electricity on the exchange to sell to the residential 
and commercial end-users that make up Japan's $71 billion retail 
market for power.  urn:newsml:reuters.com:*:nL3N16V2T4  
    Electricity traded on JEPX still represents less than 3 
percent of Japan's power demand, although Tokyo's efforts to 
increase price competition and efficiency will likely result in 
volumes rising further over the next two years.  
    "As trading volumes rise, the retail businesses of former 
monopolies and new power retailers would be placed roughly on an 
equal footing," JEPX general manager Ryoichi Kunimatsu said in 
an interview, fostering the smooth trading and liquidity needed 
for price discovery.  
    As the utilities start selling on the exchange power now 
locked up in bilateral agreements, JEPX trading as a proportion 
of total power will grow threefold by March 31, 2018, he said.  
    Japan's former power monopolies - in response to a request 
from the Ministry of Economy, Trade and Industry (METI) - have 
said they will put at least 10 percent of their power sales on 
the exchange next fiscal year, with some of them raising their 
supply to JEPX to 20 to 30 percent of their total output in the 
year after that.  
    "Trading volumes at JEPX are likely to rise to above 15 
percent of total domestic power demand in the year starting [on 
April 1, 2018]," Kunimatsu said.  
    As with other exchanges, JEPX needs liquidity for smooth 
trading and price discovery.  
    "If they reach a liquidity level of 15-25 percent (of the 
market) that would be the tipping point for developing JEPX as 
the central platform for a competitive electricity market in 
Japan," said Per Christer Lund, science and technology 
counsellor at Innovation Norway.  
    Lund advised JEPX on its reforms, and also worked at Nord 
Pool, a European power exchange operator closely studied by 
Japan ahead of its power reforms.  
 
    END-USERS SLOW TO TAKE 'DRASTIC' STEP 
    While plenty of suppliers have jumped into the retail 
market, end-users have been slow to accept the new entrants.  
    Since Japan's retail sector was opened in April 2016 to 
independent producers and suppliers, just 2.57 million end-users 
- roughly 4 percent of them - have switched from nine of Japan's 
major utilities to new suppliers, according to national grid 
monitor OCCTO. In October last year, power used by those that 
switched represented 3.3 percent of the retail market.  
    Tokyo Electric Power Co  9501.T  - owner of the 
Fukushima-Daiichi reactors shattered by the 2011 earthquake - 
has been the biggest loser, with more than 1.4 million of its 
customers switching to other suppliers.  urn:newsml:reuters.com:*:nL4N1FT030  
    The biggest winners have been Japan's two largest gas 
utilities, Tokyo Gas  9531.T  and Osaka Gas  9532.T , with JX 
Holdings  5020.T  and KDDI  9433.T  the third and fourth-biggest 
beneficiaries of the switch away from Tepco and others.  
    "(JEPX) is a place for various adjustments (in power supply) 
and very useful, but the volumes are small and they need to be 
larger to make good use of it," Takashi Higo, a Tokyo Gas 
general manager for finance told Reuters.  
    Others see the shift away from the monopolies as more 
significant. 
    "Given the conservatism of consumers in Japan ... to take 
this rather drastic step of moving away from the old traditional 
utilities is interesting," said Lund.      
 
    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 
GRAPHIC: Japan's wholesale power trading has surged after market 
liberalisation last April    http://tmsnrt.rs/2jkFAmk 
  
TABLE: More than 2.5 mln Japan retail power users switch to new 
entrants     urn:newsml:reuters.com:*:nL4N1FT030 
FACTBOX: Japan's power reforms; rules and trading systems    
 urn:newsml:reuters.com:*:nL3N16Q1O8 
FACTBOX: Price war breaks out as power market opens up    
 urn:newsml:reuters.com:*:nL3N16V2MH 
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> 
 (Reporting by Osamu Tsukimori and Aaron Sheldrick; Editing by 
Tom Hogue) 
 ((osamu.tsukimori@thomsonreuters.com, +813 6441 1857, Reuters 
Messaging: osamu.tsukimori.thomsonreuters.com@reuters.net;)) 
 
Keywords: JAPAN POWER/TRADING