Kansai Electric and Osaka Gas in battle for gas and electric utilities at Kansai region
Kansai Electric has tried to strengthen its position further by buying stakes in LNG projects outside Japan, getting into retail gas sales and even delving into real estate.
Retail power and gas heavyweights Kansai Electric Power and Osaka Gas are locked in a struggle for dominance in the Kansai region, whose economy is nearly the size of South Korea's and includes Osaka, the second-biggest city in Japan.
After the Fukushima nuclear disaster, the country's power monopoly system - in place for nearly 70 years - was partially dismantled in 2016, followed by the liberalization of the retail gas market a year later.
Hundreds of new power sellers soon arrived on the scene, some with just a few dozen accounts. Since then, the Kansai region has seen the most gas customers, and the second-highest number of power customers, switch providers.
"It's like the elephants battling horses. When power and gas firms battle it out against Tokyo Electric (Tepco) or Kansai Electric for an extended period, gas firms could lose," said Reiji Ogino, senior analyst at Mitsubishi UFJ Morgan Stanley Securities.
That is because power companies, which tend to be larger and more diverse, can better weather deregulation, Ogino said.
Kansai Electric, for instance, now sells gas to retail customers. And the company, already the third-largest power supplier in Japan, has an additional advantage: in the past 14 months, it has resumed operations at four reactors idled after the Fukushima disaster.
That has allowed it to cut its electricity prices by 5.4 percent in July, making them the fourth-lowest among the former 10 power monopolies.
A price war is especially beneficial for large users such as 7-Eleven Japan, which has switched its thousands of convenience stores to Kansai Electric. The savings could amount to tens of millions of dollars per year, according to local media reports.
But Kansai Electric still offers cheaper combined power and gas service than Osaka Gas. This year it also began offering additional discounts, such as waiving basic monthly fees for gas, which have accelerated the pace of customer acquisitions from its chief rival.
Ogino said that the power and gas industries in Japan are likely to enter a period of alliances of former power and gas monopolies in different regions by 2020. The 10 years after that might see mergers and acquisitions, he added.
But he said a merger of the two Osaka-area rivals would be unlikely.
Shinichi Yamazaki, senior sector analyst at Okasan Securities, agreed.
"Chances for acquisitions or mergers in Kansai region may be slim because the companies are large in size, but there may be such cases in remote areas," Yamazaki said.
"The history of their battle goes back two or three decades, but given Osaka Gas thinks it's no match for Kansai Electric, it has been diversifying its businesses from way back," he said. "History repeats itself, and the battle will continue."
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
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