Box 1. Market reform gets a second wind in Japan

Japan has accelerated its liberalisation process in recent years. Three more phases of natural gas price deregulation were implemented in 1999, 2004, and 2007, and, in April 2017, the Japanese city gas market became fully open, enabling the entire natural gas consumer base to select its own gas supplier.

This deregulation process is a part of a broader set of energy system reforms, which include both power and gas systems. Under the 2017 reform, the chain of integrated gas businesses will be gradually segmented and restructured into three sectors: gas manufacturing business, pipeline service business, and gas retail business.

Another implication of the reform is the promotion of third-party access, which is to be implemented in phases, starting with LNG terminals. Businesses that own LNG terminals are prohibited from rejecting third-party use without a reason. This is also applicable to LNG terminals owned by electricity companies and other industries. Under the reform, LNG terminal owners must report and publish their annual utilisation plans and the benchmarks of their rate systems. If the terms and conditions of use are inappropriate, the government can order changes in the conditions. The unbundling of pipeline service businesses from the three major gas companies is also being targeted by 2022.

Based on the original Electricity Supervision Committee, the Japanese government added natural gas supervision and changed its name to the Electricity and Gas Market Surveillance Commission. The chairman of the committee is appointed by the Minister of the Ministry of Industry, Economy and Trade. The Electricity and Gas Market Surveillance Commission has a supervision office in major areas of the country. Three departments are set up at the Executive Board of the headquarters to conduct policy co-ordination, market supervision, and supervision of the network. The committee has also been given the functions of co-ordination and arbitration and, therefore, has a strong binding force on market players.

References

IEA (International Energy Agency) (2013), Partner Countries Series – Developing a Natural Gas Trading Hub in Asia, OECD/IEA, Paris, https://webstore.iea.org/partner-country-series-developing-a-natural- gas-trading-hub-in-asia.

IEA (2018a), World Energy Outlook 2018, OECD/IEA, Paris, www.iea.org/weo/. IEA (2018b), Gas Market Report 2018, OECD/IEA, Paris.

IGU (International Gas Union) (2018), Wholesale Gas Price Survey 2018 Edition, IGU, Barcelona, www.igu.org/publication/301683/31.