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Restructuring power distribution via The Japan Times

Japan’s 10 power companies have enjoyed regional monopolies under government protection, controlling not only electricity generation but also electricity transmission from power stations to transformer substations and distribution to individual users.

This system is coupled with the government-backed price setting mechanism, in which the power companies are allowed to pass on the investment cost plus a certain margin (company profits) to consumers, thus enabling them to enjoy stable profits — a factor behind electricity bills that are higher than in other major industrialized countries.

The fiasco at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant has exposed the defects inherent in the system. Because there is only one dominant power supplier in one region, the system cannot ensure stable power supply once a major accident like the Fukushima nuclear crisis happens.

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