|Author Name||KAINOU Kazunari (Fellow, RIETI)
|Creation Date/NO.||June 2008 08-J-023|
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In the Japanese gas industry there are 215 general gas companies (generally known as "town gas" companies) that provide gas for broad city areas, and some 1,700 community gas companies that operate through approximately 8,000 local areas to provide gas mainly for household use in specific housing complexes and buildings. There is reportedly a substantial "internal price gap" of more than twofold in both the community gas business and the general gas business, but there has been no comparative analysis using objective methods that enables us to look into the actual situation with regard to this price gap. This gives rise to confusion in discussion of the issue.
In this paper I endeavor to conduct a comparative analysis of the actual situation regarding the internal price gap in each gas business, doing so by means of a statistical analysis of factors such as each gas business's distribution of charges for household use by region and by raw material. The analysis is based on the Gas Industry Annual Statistics of Japan and other data, including charges for household use levied by general and community gas companies and various supply indicators derived from surveys by the Japan Community Gas Association.
As a result of this comparative analysis I observe that nationwide, and in most regions and prefectures, the charges for household use are significantly lower in community gas business than in general gas business, and there are also fewer disparities with regard to charges. Also, when adjusting and comparing volumes of supply per meter I determine that although general gas business is given priority under the Gas Business Act, its charges are significantly higher, at around ¥0.2--0.5/MJ, than those of community gas utilities, confirming the seriousness of the internal price gap problem.
In addition, with regard to the entry of community gas utilities into the service areas of general gas companies, charges for household use by general gas companies with community gas companies operating in their service areas are significantly higher, whereas there is no significant gap in the case of community gas business. This demonstrates that the competitive impact of local entry is not functioning effectively.
Given this result, I believe it is necessary to analyze and clarify still further the factors causing the internal price gap within the gas business, especially the general gas business, and the degree of leeway for improvement by means of management effort and the reform of the policy system. The analysis would be based on factors such as the detailed cost structure and the conditions applicable to the service areas.