Photo/Illutration A power transmission line (Asahi Shimbun file photo)

Major electric power companies are refusing to sign contracts with corporate customers who want a new alternative to the soaring prices that startups selling electricity are demanding.

With fuel prices unlikely to decrease anytime soon due to the continued fighting in Ukraine, the major utilities face the possibility of even further losses because of the difficulties of containing procurement costs.

Four major electric power companies admitted that they were no longer signing contracts with corporate customers seeking new sources of electricity.

“We are refusing requests from companies moving away from startups because we would be unable to provide energy at prices that are advantageous to our customers if we procure power through the market,” said an official with Hokuriku Electric Power Co., which stopped signing new contracts from March.

The three other utilities that are no longer signing new contracts with corporate customers are Kansai Electric Power Co., Shikoku Electric Power Co. and Kyushu Electric Power Co.

And the other six major utilities are also noting that some proposals made by corporate customers have not led to contracts because the prices being asked for would be unprofitable for the utilities. 

Many startups were established after the deregulation of the electric power market. But most of those firms do not have their own power generation facilities and often purchase electricity on the wholesale market.

But between January and March, the average wholesale price for a kilowatt-hour of electricity was 23 yen (18 cents), a threefold increase from two years ago.

Because the purchase price of electricity now often exceeds the selling price offered by startups, some have steeply raised their selling price.

That has led to a rush of corporate customers moving away from such startups for their electricity. 

Many startups have been unable to keep pace with the changing market trends and in fiscal 2021, 31 such companies filed for bankruptcy or stopped operations, according to a study by Teikoku Databank Ltd.

Major utilities are also facing increasingly difficult times. After liberalization, many chose to shut down costly thermal power generation facilities, which has reduced their electricity-producing capacity.

So even if customers return to the major utilities from the startups, the utilities may be unable to directly supply the electricity, forcing the companies to turn to the wholesale market.

But with the increasing prices on that market, utilities also possibly face running up losses the more they sell electricity purchased at higher prices.