Japan's changing regulatory environment for electricity sales is starting to attract the interest of foreign companies that believe that they can undercut the high prices charged by the nation's 10 regional electric utilities. Since the start of 1996, independent power producers have been able to wholesale electricity to these former monopolies. Beginning next April, they also will be free to sell power directly to industrial users. TEXACO INC., for one, believes that these opportunities are worth exploring. It and KOA OIL CO., LTD. have agreed to study the feasibility of moving into the IPP business, including building power plants at Koa Oil's two refineries. Industry sources say that the two have their eye on sales to KANSAI ELECTRIC POWER CO., INC. and CHUBU ELECTRIC POWER CO., INC. If they do win contracts, the same insiders add, Texaco and Koa Oil will build a 500,000-kilowatt thermal power plant at the Japanese company's Marifu, Yamaguchi prefecture refinery as well as at the one in Osaka. They could be operational as soon as 2003. Using Texaco technology, these power-generating facilities could sell electricity for 20 percent to 30 percent less than what Japan's electric utilities charge. Texaco and Koa Oil have no time frame for reaching a decision. Until recently, the American oil major owned 25 percent of its prospective Japanese partner (see Japan-U.S. Business Report No. 359, August 1999, p. 18).
An exchange rate of ¥113=$1.00 was used in this report.aaaaaa