Japanese firms call for transparency in power market

Japan's small-scale power suppliers are calling for transparency in the country's wholesale electricity market, to prepare the environment under which they can make a bid with adequate prices.

A group of 56 power retailers on 18 January requested that trade and industry minister Hiroshi Kajiyama disclose information of a power market, such as the demand-supply curve in a single price auction system, surplus in supply and stocks of generation fuels. This aims to avoid any repeat of the recent power shortage and a spike in wholesale prices that severely hit management of retailers, especially those without power units.

The sharp rise in wholesale power prices in the first half of this month was triggered by firm bidding prices given by retailers that are obligated to ensure stable supplies to their customers. This happened despite reduced thermal power output because of fuel shortage, specially LNG. The retailers lifted buying prices to secure supply, even during hours with no offers, under which the bidding levels become deal prices.

The group has emphasized in their request that disclosure of necessary information would help them bid with adequate prices, reflecting the current situation under which most of retailers make their bids by referring to the previous day's deal prices.

Meti has just started discussion about issues that caused the recent electricity shortage. Information disclosure should be one of the topics it will verify in future discussion. The disclosure of fuel availability might be necessary to push forward with further expansion of the deregulated market, some industry participants also pointed out. But others said this may go against market mechanism.

The group also asked Kajiyama to return unexpected profits, which major utilities gain from supplying electricity to fill in imbalances, to power retailers and consumers in a rational way based on the fair verification.

Meti has set a cap on imbalance charges at ¥200/kWh ($1.93/kWh) from 17 January-30 June, to ease the burden on small power firms. But the retailers have called for a retrospective review and fair verification between electricity supplies secured by paying imbalance charges and those purchased at much higher market prices.

By Motoko Hasegawa