Regulation of electricity utilities – sales of power

Approval to sell power

What authorisations are required for the sale of power to customers and which authorities grant such approvals?

See question 2.

In April 2016 the retail business was fully liberalised, and all entities are allowed to be engage in the retail electricity business including supplying electricity to low-voltage consumers, by registering as electricity retailers; to obtain the registration, an entity must prove its capacity to provide sufficient electricity to meet the demand of its customers.

An entity without registration as an electricity retailer is allowed to supply electricity after obtaining approval on ‘specified supply’ from the Minister of ETI to a recipient with which it is closely associated (such as a subsidiary).

Power sales tariffs

Is there any tariff or other regulation regarding power sales?

Yes. Even after full liberalisation of the retail market in April 2016, regarding electricity supply to low-voltage consumers (consumers with contracts for electricity consumption of less than 50kW), electricity retail companies (which were former general electricity utilities) must provide a power sales tariff and obtain approval for it from the Minister of ETI, and must supply electricity to low-voltage consumers in accordance with the tariff as long as such consumers desire. This treatment will continue until 2020 or later when the Ministry of ETI decides on an area-by-area basis (area means a service area of each general transmission utility) that sufficient competition exists in a certain supply area.

From April 2016, all retail companies are legally required to explain retail prices and other conditions in writing to their customers before entering into supply agreements.

Rates for wholesale of power

Who determines the rates for sales of wholesale power and what standard does that entity apply?

Both wholesale electricity utilities and wholesale suppliers have had to provide rates and other conditions of their wholesale supply and file them with the Minister of ETI. The price must be based on costs, except when the wholesale supply is provided under the conditions set by a successful bidder in a bidding process implemented by a general electricity utility. After the wholesale regulation was abolished in April 2016, all power generators are generally able to sell electricity at their discretionary conditions, even when they engage in electricity supply to the former general electricity utilities. On the other hand, to the extent that there is still a regulation requiring the former general electricity utilities to provide electricity at regulated prices to low-voltage consumers who desire it, these utilities are required to hold a bidding process when they are to construct or replace certain thermal power plants by themselves.

The Ministry of ETI would like to increase the volume of electricity traded on the electricity wholesale exchange (JEPX), so that power generators and electricity retailers can sell, purchase or both, electricity with more flexibility and can hedge their risks through market trading, including derivatives. Prohibitions against insider trading and manipulation in the electricity wholesale market and relevant rules were introduced in April 2016.

The rates and terms of supply of renewable energy electricity are provided, depending on the kind of energy and the scale of the facility, by public notice issued by the Minister of ETI, taking into consideration the opinion of the Calculation Committee of Purchase Price. The Minister of ETI considers costs that are ordinarily necessary for supply and appropriate profits when they decide the price and the time period. See question 5.

Public service obligations

To what extent are electricity utilities that sell power subject to public service obligations?

Ten general transmission utilities (or, at least until 2020, for supply to low-voltage consumers, retail companies which were former general electricity utilities) are responsible for meeting certain public service obligations (to supply electricity at regulated conditions when certain end users cannot receive such service from any retail companies).