Selling household electricity, bundled with gas, at full retail liberalization (2015)

Selling electricity was a way of defending gas

Two months before entry, President Hirose Michiaki said that of the roughly 11 million households it supplied with city gas, “twenty to thirty per cent could be taken by other companies.” Spoken of as a new business, the move into electricity retailing looks, seen from that angle, like a pre-emptive step to avoid letting go of gas customers. As President Uchida Takashi put it two years later, “winning new contracts in electricity also serves to protect the gas contracts we already have” — electricity was at once a product to sell and a device for holding contracts in place.

The price of it, though, is plain in the first year’s figures. In the year to March 2017, as it widened into the household market, operating profit in the power segment shrank from $85.4M (¥9bn) to $40.1M (¥5bn), and consolidated operating profit fell to $520.7M (¥58bn). While customer wins ran ahead of forecast, more than 650,000 contracts left city gas, and Uchida himself acknowledged that in the large-lot field contracts risked being won at a loss. Earnings that had been stable under regulation were exchanged for earnings that must be taken again every year on price and service — the meaning of the move into electricity lies in that exchange rather than in the count of contracts.