Tokyo and Chubu Electric Power will consolidate existing thermal power plants into JERA in April 2019. A thermal power generation company with a power generation scale of 67 million kW and LNG handling volume of 35 million ton is born. With the full-scale integration of JERA, we have entered the stage where we should deeply think about the impact on the electricity retail market.
The competition between TEPCO Energy Partner and Chubu Electric Power will enter the new stage in the future.
The sales styles of both today are slightly different. TEPCO EP secures customers by themselves in the Kanto region, and a wholly owned subsidiary (Tepco Customer Service, hereafter TCS) does in areas other than Kanto. Although TCS procures the main power source from TEPCO EP, the price between them is only equivalent to fuel cost only therefore kept at a cheap level (It is strongly regarded as a problem in the industry that fixed costs are not included ).
In areas other than the Chubu region, Chubu Electric is engaged in set sales of electricity and gas, or total solution service mainly by affiliated companies such as CD Energy Direct (a 50% equity investment with Osaka Gas), Diamond Power (80% subsidiary), and Sea Energy (100% subsidiary).
The metropolitan area is an extremely important market for both parties. The power supply of Chubu Electric Power Company is located in the Chubu area, and due to the capacity constraint of the AC / DC conversion facility, there was a limit to entering the metropolitan area. But since April the two power supplies are integrated into JERA, Chubu Electric will effectively obtain unlimited power in the metropolitan area.
For Chubu Electric Power, the main object of JERA integration is exactly this point. They want to obtain a sales channel to the metropolitan area released from competition with the Kansai Electric Power Company with overwhelming equipment scale of nuclear power. For this reason they have integrated JERA.
Negotiation has begun around the conditions that JERA supplies a large amount of wholesale power to Chubu Electric Power affiliated companies. As TCS plays a price competition only for fuel cost in the Chubu area, Chubu Electric Power is looking at opportunities to do similar things in the Kanto region.
In addition to purchasing wholesale power from JERA, there are several ways to acquire power. It is possible to purchase JERA owned power station in Kanto directly, and JERA shares owned by TEPCO & Chubu Electric Power 50% each. JERA’s future may be tough due to the restart of nuclear power generation and expansion of renewables. For this reason JERA has sufficient merit to sell equipment or shares under the circumstances where the business environment is good.
In addition to this, it is a well-known fact that the Ministry of Economy, Trade and Industry, the de facto parent of JERA, aims to reorganize the 9 electricity regime through retail liberalization. Full-scale entry into Kanto and market liquidation by Chubu Electric Power will also coincide with a big picture drawn by METI.
Regardless of the method, it is conceivable that Chubu Electric Power will acquire the power of Kanto possessed by JERA under favorable conditions, so that the restructuring of the retail business will accelerate at once. The birth of JERA is not limited to the reorganization of thermal power generation. Rather, it should be understood as a milestone of the battle over leadership over the Kanto market.