Tepco says will enter city gas market next July

12/26/2016

TOKYO (Reuters) -- Tokyo Electric Power Company Holdings (Tepco) will enter the city's metropolitan gas retail market next July, it said on Monday, opening a new stage of competition with Japan's biggest city gas operator Tokyo Gas.

TEPCO Energy Partner Inc, Tepco's retail unit, will work with gas operator Nippon Gas, which already has 320,000 city gas retail customers, to offer maintenance and other services.

The pair aim for about 500,000 customers by the end of March 2018, including Nippon Gas' existing customers, and to boost that to one million by the end of March 2020, or about 10% of Tokyo Gas' customer base, a TEPCO Energy Partner's official told a news conference.

The move chimes with Japan's plan for nationwide liberalization of its $20 billion retail gas market in April 2017. Competition between utilities and gas operators was spurred in April when Japan's $70 billion retail electricity market was opened up.

Under the latest agreement, Tepco will provide piped gas equivalent to about 275,000 tpy of liquefied natural gas (LNG) from next April to Nippon Gas which has been buying LNG from Tokyo Gas.

To counter the challenge, Tokyo Gas aims to further expand its market share in electricity, its president Michiaki Hirose told a separate news conference.

"We've gained about 600,000 electricity customers, exceeding our target of 530,000, but that's only 2-3% of Tepco's 20-22 million customers," he said.

"Our goal to win a 10% market share in 2020 would represent about 2.2 million customers ... we want to achieve that although the hurdle is fairly high."

Asked whether the liberalization of the city gas market will prompt consolidation among utilities and gas operators, Hirose said that was likely.

"Japanese energy companies need to become competitive in the global market, which means they will need economy of scale. For that reason, I expect to see more consolidation in the industry," Hirose said.

"There is also a chance that two or three big fuel procurement companies like JERA will be created in Japan in the future. We want to be a key player in one of them," he added.

JERA, the world's biggest importer of LNG, is a fuel joint venture between Tepco and Chubu Electric Power.

Reporting by Yuka Obayashi; Editing by Ruth Pitchford