Let’s take a look at Tariff regulation this time. An upper limit on revenue (so-called revenue cap method) will be introduced for the delivery fee. The electricity rate regulation will change the framework greatly from the traditional total cost & fair return principle. Accordingly, the delivery cost can also be transferred to retail tariff(including price increases) . Both will be enforced on April 1, 2023.
Regarding the delivery fee, the upper limit of revenue and the level of tariff are regulated respectively. A general power transmission and distribution company will calculate the revenue limit for each period specified by a ministerial ordinance and receive approval from the Minister of Economy, Trade and Industry(METI), and the Minister has the authority to change this limit. In addition, the delivery fee will be calculated within the upper limit of income, but that fee will be required to be approved.
The question here is, first of all, how much the act of “approval” is. For example, if a guideline similar to the current guidelines for the review of delivery fees is prepared and the monitoring committee is strongly involved in calculating the revenue cap, it will be substantially the same as the current process for reviewing and approving the delivery fees.
The next important thing is how often to calculate the income cap. Depending on whether this process is repeated every year or every three to five years, the burden on general power transmission and distribution operators varies greatly. Even under the current system, they have “freedom not to change the delivery fee”. It is important to note, however, that the new system will require an approval of the revenue cap at defined intervals, with or without changes in delivery fees, and will therefore effectively tighten regulations.
As described above, it is expected that the upper limit on the revenue of the delivery fee will be quite strict depending on the operation, so it is not necessary to judge that the regulation has been reduced by the revenue cap method at this time, and it is necessary to carefully consider the future system design.
On the other hand, in the retailers’ tariffs, it is now possible to change them with only notification (so-called “pass-through”) in accordance with changes in delivery fee, including raising prices.
We would like to point out two points here. First of all, retail tariff restriction system is incompatible with liberalization, and I think that the continuation of restriction itself should be discussed more deeply. Next, even if the pass-through of the delivery fee is permitted, it is surprisingly difficult to apply the fluctuation of it for each basic fee and metered fee technically, and the cases where it can be strictly determined to pass on (pass-through) will be surprisingly limited.
In order to accumulate detailed studies on rate regulation over the years 2020 and 2021, it is necessary to pay close attention to discussions until the enforcement of the year 2023.