Legally separating the grid into Tohoku Electric Power Network (2018)

What a reorganisation with a statutory deadline left behind

This separation was not something Tohoku Electric drew up because it wished to; it was an answer to a compliance requirement that the 2015 amendment of the Electricity Business Act had specified down to the date. Even so, there was latitude in how to answer, and Tohoku Electric did not create a new pure holding company: it left the parent, which runs generation and retail, standing as an operating holding company, and placed Tohoku Electric Power Network beneath it. President Harada Hiroya, who signed the absorption-type split agreement, stepped down on the very day it took effect, and president Higuchi Kojiro took over the post-separation company. Sending out 7,672 people — the largest single body of employees — while moving neither the parent’s corporate name nor its founding year is, as compliance design, a restrained arrangement.

What made the meaning of the separation clear, however, was the figures that lined up afterwards. The recurring losses of ¥49.2bn in the year to March 2022 and ¥199.3bn in the year to March 2023 fall on the generation and retail side, which takes on the swings of fuel and market prices. The transmission and distribution side, meanwhile, was granted by the state a revenue envelope of ¥2,394.3bn over five years under the revenue-cap system that began in April 2023. Two earnings structures that had been averaged out inside a single legal entity now stand side by side as separate sets of accounts.