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Kansai Electric ... locked in a struggle

Kansai Electric ... locked in a struggle

Kansai region a battleground

OSAKA

Retail power and gas heavyweights Kansai Electric Power and Osaka Gas are locked in a struggle for dominance in the Kansai region, whose economy is nearly the size of South Korea’s and includes Osaka, the second-biggest city in Japan.

After the Fukushima nuclear disaster, the country’s power monopoly system - in place for nearly 70 years - was partially dismantled in 2016, followed by the liberalisation of the retail gas market a year later.

Hundreds of new power sellers soon arrived on the scene, some with just a few dozen accounts. Since then, the Kansai region has seen the most gas customers, and the second-highest number of power customers, switch providers.

Nowhere is that churn more evident than with Kansai Electric and Osaka Gas.

Kansai Electric pulled about 580,000 retail gas customers from Osaka Gas, but lost about 680,000 power customers to it.

Overall, Kansai Electric lost nearly 1.7 million power users. But its shares have risen 27 per cent since the beginning of 2017, compared with about 1 per cent decline for Osaka Gas.

"It’s like the elephants battling horses. When power and gas firms battle it out against Tokyo Electric (Tepco) or Kansai Electric for an extended period, gas firms could lose," said Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities.

He said Kansai Electric is predicted to shed 10 to 20 per cent of its customers in coming years. Osaka Gas, however, is expected to see its customer base shrink by 20 to 30 per cent, he added.

That is because power companies, which tend to be larger and more diverse, can better weather deregulation, Ogino said.

Kansai Electric, for instance, now sells gas to retail customers. And the company, already the third-largest power supplier in Japan, has an additional advantage: in the past 14 months, it has resumed operations.

That has allowed it to cut its electricity prices by 5.4 per cent in July, making them the fourth-lowest among the former 10 power monopolies.

A price war is especially beneficial for large users such as 7-Eleven Japan.




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