Contributed By Nagashima Ohno & Tsunematsu
The last piece of the ongoing structural reform, the 'legal unbundling', will come into effect on 1 April 2020. Under the legal unbundling, an operator of the General Transmission and Distribution Business (ie, Major Utilities except for Okinawa Electric Power Company, Incorporated, in the Okinawa region) is not allowed to operate Electricity Generation Business (if it is considering supplying electricity for retailers or consumers) or Retail Electricity Business (except for such business in certain isolated islands) and is required to create a separate entity if it also wants to operate such businesses within its group. It aims to secure the impartiality of the Major Utilities as operators of transmission and distribution networks so that every electricity retailer and electricity generator may be given equal access to their networks under fair and equal conditions. In order to achieve the goal, as a supplement of a separate entity requirement, new regulations would be promulgated that require a firewall arrangement and other measures to prevent the transmission and distribution network operators from exercising influence on the operations of their affiliate retailers and/or generators. Please see 5.1.3 Terms and Conditions Imposed in Approvals to Construct and Operate Transmission Facilities.
In addition, the capacity market, where the value of generation capacity in 2024 and subsequent years will be auctioned and traded, will start to operate in 2020.