Japan's Old School Utilities Face Nuke Threat From Their Own

(Bloomberg) -- Japan's traditional regional utilities, already defending their territory against nimbler new entrants, face a fresh threat: one of their own is now stealing customers thanks to cheaper nuclear-powered electricity rates.

Kansai Electric Power Co. is one of a few utilities to restart atomic power plants, which will allow it to offer cheaper rates as it continues its expansion outside of its traditional region, General Manager Michiya Sakata said Friday after releasing earnings. Seven-Eleven Japan said on Thursday that over 3,000 of its stores will switch contracts to Kansai Electric from utilities including Tokyo Electric Power Co. and Shikoku Electric Power Co. due in part to cheaper rates and a cleaner mix.

“We can't compete in terms of price,” Tokyo Electric President Tomoaki Kobayakawa said Thursday when asked about how it would compete with lower rates from Kansai Electric. “We will try to gain customers by offering a wide variety of services or bundle power with gas sales.”

Japan's regional utilities have been losing customers since the market was liberalized in 2016 allowing households and small businesses to pick providers for the first time. Since the reforms, incumbents have spent most of their effort competing against new entrants, ranging from mobile phone carriers to gas suppliers who bundled power sales with other services to offer cheaper overall prices.

Osaka-based Kansai Electric, which was the only one of 10 regional power utilities to see fuel costs decline in the year ended March, lowered its rates for customers inside its region last year after restarting atomic units and is mulling another cut.

The utility's net income rose 7.9 percent to 151.9 billion yen in the year ended March, beating its forecast of 140 billion yen, it said Friday after the market closed. The company was the biggest gainer among utilities when the market reopened Tuesday, rising as much as 4.2 percent to 1,594.5 yen.

“Competition is very tough right now, and we only expect it to get tougher,” Shikoku Electric Deputy Director Kenji Sagawa said Thursday during a briefing in Tokyo. “We are losing to both new providers and incumbent regional players.”

To contact the reporter on this story: Stephen Stapczynski in Tokyo at sstapczynsk1@bloomberg.net.

To contact the editors responsible for this story: Ramsey Al-Rikabi at ralrikabi@bloomberg.net, Aaron Clark, Abhay Singh

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