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BUSINESS DIVERSIFICATION STRATEGIES IN U.S.

AND JAPANESE ELECTRIC UTILITIES Hiroyuki Yokoyama USJP Occasional Paper 07-16

Program on U.S.-Japan Relations Harvard University 61 Kirkland Street Cambridge, MA 02138-2030 2007

ABOUT THE AUTHOR

Mr. Yokoyama earned his B.S. and M.S. in Civil Engineering from Nagoya University. At the Tokyo Electric Power Company (TEPCO), he has been chief of the Minami-Aiki Construction Office, Kanagawa Hydropower Office, and, most recently, Deputy Manager for the Affiliated Companies Department, which is responsible for evaluating new businesses of TEPCO and its subsidiaries. Between 2001 and 2003, he served as a researcher at the Institute for Policy Sciences, a non-profit think tank, where he examined issues related to energy, environment, and regional economic development. While at Harvard, Mr. Yokoyama explored business diversification strategies in the United States and Japan.

ON THE OCCASIONAL PAPERS OF THE PROGRAM ON U.S.-JAPAN RELATIONS Established in 1980, the Program on U.S.-Japan Relations of the Weatherhead Center for International Affairs and the Reischauer Institute of Japanese Studies enables outstanding scholars and practitioners to come together for an academic year at Harvard University. During that year, Program Associates take part in a variety of activities and conduct independent research on contemporary U.S.-Japan relations, Japan's relations with the rest of the world, and domestic issues in Japan that bear on its international behavior. The Occasional Paper Series is wide-ranging in scope. It includes papers that are valuable for their contributions to the scholarly literature; it also includes papers that make available in English the policy perspectives of Associates from government, business and banking, the media, and other fields on issues and problems that come within the scope of the Program. Needless to say, all papers represent the views of their authors and not necessarily those of their home organizations, the Program, the Weatherhead Center for International Affairs, the Reischauer Institute, or Harvard University.

TABLE OF CONTENTS

Introduction Chapter 1. Why Do Firms Diversify? What Can Be Learned From Past Lessons? Chapter 2. Diversification Strategies of Japanese Electric Power Companies Chapter 3. Diversification Strategies of U.S. Electric Utilities Chapter 4. Learning from Past Experiences Conclusion Figures Bibliography

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4 9 16 25 28 31 46

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Composition Ratio of Diversified Businesses in Consolidated Business Performance Figure 15. Business Deployment in Japanese Electric Power Companies Figure 10. Unavoidable Trade-offs Among Modes of Expansion and Diversification Strategies Figure 6. The Progress of Operation Profits from Sales in Diversified Businesses Between 2002 and 2005 Figure 12. Growth Vector Components Figure 2. Ten Electric Power Companies by Service Areas Figure 7.LIST OF FIGURES Figure 1. Pattern of Diversification Figure 4. The Progress in Revenue from Sales in Diversified Businesses Between 2002 and 2005 Figure 11. Electric Utilities by Type of Ownership Figure 16. Business Deployment in Electric Utilities Figure 5. Shareholder-owned Electric Utilities 31 31 32 32 33 34 34 35 36 37 38 39 40 41 42 43 . Staged Expansion in the Scope of Liberalization Figure 9. Product-mission Matrix Figure 3. Changes in Net Income for 10 Japanese Electric Power Companies Figure 14.S. Major Characteristics of U.S. Changes in Operating Revenue for 10 Japanese Electric Power Companies Figure 13. Number of Mergers and Acquisitions in U. Changes in Electricity Sales for 10 Japanese Electric Power Companies Figure 8.

Figure 17. Comparison of Major Electric Utilities in the United States and Japan Figure 18. Comparison of Business Circumstances of Electric Utilities in the United States and Japan 44 45 .

ABBREVIATIONS CRIEPI Central Research Institute of Electric Power Industry in Japan Edison Electric Institute Energy Policy Act Electricity reliability organization Exempt wholesale generation Federation of Electric Power Companies of Japan Federal Energy Regulatory Commission Investor-owned utility Independent power producer Kansai Electric Power Company Merger and acquisition Public Utility Regulatory Policies Act Regional transmission organization Tokyo Electric Power Company EEI EPAct ERO EWG FEPC FERC IOU IPP KEPCO M&A PURPA RTO TEPCO .

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technology. corporate brands. they are making efforts to diversify. Since the collapse. Much of the research to date has been conducted in pursuit of an unequivocal conclusion that business diversification is either universally profitable or universally unprofitable. Japanese electric power companies have been trying to expand their business activities to other fields. At present.” 2 Hideaki Miyajima et al. Corporate Strategy: A Resource-Based Approach (New York: McGraw-Hill Irwin.” 20 November 2006.. “Report of the Research Committee on the Diversification of Japanese Companies and Corporate Governance. most of them have been restructuring and applying thorough selection and concentration in their core field. 2 1 1 . 2003.jp/jouhou/soken/kenkyu/ron063_pr20030206. diversification was an essential strategy for corporations whose main businesses had slowed down. large Japanese firms drastically diversified during the years of Japan’s economic bubble at the start of the 1980’s. I think Japanese electric power companies have a wealth of management resources including customer bases. in general. Collis and Cynthia A. <http://www. Montgomery. 2005) 98. Ministry of Finance. and financial power. Nonetheless.mof. David J. In other words. On the other hand. considerable research on corporate strategy and business diversification was conducted on such firms to examine their performance. however. it seems that “conclusions from such research vary widely depending on who is doing the analysis and on the issues being addressed. Some of their non-electric businesses.” 1 As many U.pdf>.go. it is said that “even when business selection and concentration were important management challenges.S corporations diversified in the 1960’s and 1970’s. do not seem to have prospered.INTRODUCTION Since the deregulation of electric utilities in 2000.

• There will be a certain amount of trial and error before achieving a favorable outcome. I will examine the differences in business diversification between U. After that. Diversification will also be defined in this chapter. 2 . describe the strengths and weaknesses in the industry. the progress of business diversification will be explored and discussed using financial data. There should be something to learn from past lessons as well as experiences with diversification both in the United States and Japan. As a first step. after presenting an outline of electric power companies and deregulation in Japan. I will examine the business diversification of electric utilities in the United States and Japan considering the relevant business circumstances. with their management resources. In this chapter.In this paper. major Japanese electric power companies. would have the potential to expand their business fields outside of electricity. In Chapter 2. and explore them by examining various resources. I will attempt to organize and arrange the theoretical framework of diversification. • I would like to clarify the possibilities. I will begin by defining diversification and asking why firms embark on this path. such as Tokyo Electric Power Company (TEPCO). In Chapter 1. the business diversification of Japanese electric power companies will be covered.S. I will try to identify some implications from my findings. Finally. My hypotheses are follows: • Under deregulation. the reasons why firms diversify and the framework of diversification will be outlined in order to prepare for an examination of diversification. and Japanese electric utilities.

The lessons to be learned from U.S electric utilities.In Chapter 3. issues to keep in mind in addressing business diversification are proposed and the implications of empirical knowledge derived from past business practice and research will be noted. the differences in business circumstances between the electric utilities in the United States and Japan will be compared to discuss business diversification strategies. Finally. 3 . after giving an overview of electric power utilities and deregulation in the United States.S electric utilities will be described. in the conclusion. In Chapter 4. are also described in this chapter. which are in an advanced stage of diversification. In this chapter. the progress of business diversification will be examined. transitions of diversification strategies of U.

In “market development. 3 4 . Corporate Strategy: An Analytic Approach to Business Policy for Growth and Expansion (New York: McGraw-Hill. Finally. As shown in Figure 2. diversification is a more drastic and risky strategy because of the involvement of a simultaneous departure from familiar products and familiar markets. the growth of the firm is divided into “expansion” and “diversification. defined expansion and diversification as a fundamental perspective of decision-making about business structures and made several important statements on these topics. “market penetration” denotes a growth direction through an increase of market share for present product-markets. What Is Business Diversification? The concept of corporate strategy was explained clearly in the 1960’s and 1970’s by academics. Growth vectors indicate the direction in which firms move with respect to their current product-market posture.” By definition. This chapter begins by defining diversification and trying to clarify the reason why firms diversify. “diversification” is distinctive in that both products and missions are new to the firms. 3 H. Igor Ansoff.” new missions are sought for the firm’s products. Igor Ansoff. 1965) 103-128. the growth of the firms and diversified expansion should be discussed. “Product development” creates new products to replace current ones. a business policy scholar. As shown in Figure 1.CHAPTER 1 WHY DO FIRMS DIVERSIFY? WHAT CAN BE LEARNED FROM PAST LESSONS? Before examining the business diversification strategies in electric utilities.

Diversification is defined as growth and expansion of firms entering related fields and new businesses. or both. “Diversification” is often used synonymously with start-up business development. the line of products and criteria on diversity should be clarified in order to facilitate the discussion. Hideki Yoshihara. Collis and Montgomery 87. until over the years it becomes increasingly more diversified. 6 ” In this definition. 7 6 5 . 5 Hideki Yoshihara et al.There is also a “pattern of diversification. The firm may then move outside its initial industry. (Tokyo: Energy Forum.” as shown in Figure 3. has taken some important steps and created the conceptual figure of business deployment in electric utilities 7 that is shown in Figure 4. 2005) 22.. a specialist in business administration. defined diversification as “increased diversity on a whole line of products to sell through business activities of firms. 1979) 9. while retaining strong core businesses. 4 Collis and Montgomery 88. Masayuki Yajima et al. often tentatively at first. Nihon Kigyo no Takakuka Senryaku Keiei Shigen Apurohchi (Tokyo: Nihon Keizai Shinbunsha. of the Central Research Institute of Electric Power Industry in Japan (CRIEPI). Denryoku Jiyuuka ni Kachinuku Keiei Senryaku: Denki Jigyo no Kinmirai.. 5 ” On the other hand. in which Masayuki Yajima. new products. the term can be defined in a broad sense as expanding business fields either to new markets. 4 “Expansion starts within the core industry and is undertaken to enhance or protect a firm’s position in that market. Of particular note is a recent study aimed at the electric power industries. In this paper.

• Firms might continue to explore diversification when the available information is not reliable enough to permit a conclusive comparison between expansion and diversification. A number of papers that give different reasons for diversification can be summarized as follows 8 : • Firms might diversify when their objectives can no longer be met within the product-market scope defined by expansion. The British economist Edith Penrose said that companies seek to diversify as external and internal inducements for growth. • Firms might diversify when diversification opportunities promise greater profitability than expansion opportunities. even though there might be risk. “Internal inducements. Collis and Montgomery 88. such as a downward shift in demand in a firm’s primary market. 9 10 6 . indicate conditions within a firm that prompt it to diversify. Penrose. 9 “External inducements” mean conditions or opportunities in a firm’s external environment. Edith T. A very typical internal inducement would be a firm’s desire to utilize its resource base. These can be summarized as follows. • Firms might diversify because the retained cash exceeds total expansion needs. the decision as to whether or not to diversify depends on corporate strategy and is critical in the growth of firms. firms diversify to grow and survive in a sustainable fashion. The Theory of the Growth of the Firm (London: Basil Blackwell. 8 Ansoff 129-130. 10 At this point. I can apply existing research findings as reasons for diversification in the electric utilities industry. 1959) 65-87.Why Do Firms Diversify? As noted above.” on the other hand. Naturally.

they seemed to be far too complex for simple answers. What Can Be Learned from Past Lessons? To date. About 70 percent of the new entries were acquisitions. but their findings were different. goods. many researchers have examined the performance of diversification. Michael E.• As external inducements. capital. the track record in unrelated acquisitions revealed that the average divestment rate was 74 percent. on average. “From Competitive Advantage to Corporate Strategy. These results showed that the success ratio of the unrelated diversified activities was extremely low. slow growth in the demand for electricity. In Japanese electric power companies. 11 Even though I hoped that these differences could be clearly accounted for. effective utilization of unused management resources. companies between 1950 and 1986. decrease of the investment in the electric power business brings some cash flow under deregulation. in particular. corporations divested more than 50 percent of their acquisitions in new industries and more than 60 percent in entirely new fields. prestigious U. and deregulation and tough competition in the electricity market. • As internal inducements. Michael Porter of the Harvard Business School studied the diversification records of 33 large. During this period. Moreover. 12 11 Collis and Montgomery 98. regional monopolies (in the case of Japan as will be described in detail below). According to his study. such as human. and information resources. 12 7 . in the end. Porter. depending on the scholar or the issues examined. each of them entered an average of 80 new industries and 27 new fields.” Harvard Business Review (May-June 1987).S.

• Factors behind the establishment of subsidiaries have diversified. or alliances. Collis and Montgomery 104-113.” where no synergy can be expected. In the past. It is said that choosing among the various modes involves unavoidable trade-offs. results in low performance. there is a tendency to choose internal development. at present. 14 8 . the main reason for establishing subsidiaries was to slash personnel expenses. 13 Miyajima and Inagaki. mergers.In a recent study on the diversification of Japanese companies and corporate governance. the following diversification and performance trends were noted 13 : • The business structure of Japanese companies was drastically diversified during the years of the bubble economy in the 1980’s. • It has become clear that “unrelated diversification. strategic use of subsidiaries has increased. joint ventures. as shown in Figure 5. however. 14 In the case of a spin-off business from the parent company and/or the intrapreneur business. In these cases. there could be a problem between the controlling share and acquiring management know-how in corporate governance. mergers and acquisitions (M&A’s) or alliances with outside partners can often be used to enter unrelated businesses because of the company’s own poor business know-how. On the other hand. • While some companies have shifted to more focused business strategies since the second half of the 1990’s. others have been increasingly diversifying. As modes of expansion and diversification strategies. firms can implement their diversification strategy through internal development. acquisitions.

Hokuriku. The Structure of Electric Power Companies in Japan Most Japanese electric power companies (Hokkaido.” 6 November 2006 <http://www. Chugoku. At present. Kansai. including major gas firms. As shown in Figure 7.CHAPTER 2 DIVERSIFICATION STRATEGIES OF JAPANESE ELECTRIC POWER COMPANIES This chapter covers diversification strategies of Japanese electric power companies. Tohoku. as shown in Figure 6. 15 9 . The Federation of Electric Power Companies of Japan (FEPC). and Kyushu) were established in 1951.fepc. Shikoku. Chubu.15 In the case of emergency situations. the 10 privately owned regional electric power companies are responsible for providing local operations from power generation to distribution and supplying electricity to their respective service areas. Okinawa Electric Power Company was founded in 1972 as the 10th in Japan. For over half a century. the progress of diversification in electric power companies will be discussed. “Electricity Review Japan 2005-2006.pdf>. they cooperate with each other to ensure a stable supply. First of all. Second.or.jp/english/erj/all. Tokyo. demand for electricity continues to grow at an average rate of 1 percent per year with the progress of information technology and the aging society. an outline of Japan’s electric power industry and electric retail deregulation will be given as a background of diversification. such as peak demand in the summer or if an accident occurs. regional electric power companies have made a contribution to social development and quality of life through a stable supply of high-quality electricity.

in 2000. In particular.meti. reflecting the entry of many new businesses other than general power utilities. The liberalization of retail electricity sales began for extra-high voltage customers (2000kW or above). 17 16 Tokyo Electric Power Company (TEPCO). Agency for Natural Resources and Energy. “Report by the Subcommittee to Evaluate System Reforms. Since the liberalization of the retail market in fiscal 2000. where liberalization has not been introduced. department stores. The price for industrial electricity. 16 A detailed study on full liberalization.Deregulation of Electric Utilities in Japan The deregulation of electric utilities in Japan has been discussed and carried out with the aim of achieving an internationally competitive level of cost. will begin some time around 2007. and was gradually expanded in scope and extended to include small-scale users (50 – 2.jp/denkihp/bunkakai/seidokaikaku_hyoka/060907-syouihoukoku.pdf>.go. decreased substantially – i. and office buildings. also dropped by 10 percent from fiscal 2000 to 2005 as a result of improvements in efficiency. such as large factories. which is relatively higher than that for industrial demand. on the other hand. As the number of companies entering the electric power business increases.” 22 May 2006.” 23 November 2006 <http://www. the price of electricity decreased by 18 percent during the period between fiscal 1995 and 2005. to include residential customers. Despite the recent surge in fuel costs. TEPCO Corporate Brochure 2006. competition is steadily intensifying.e. the price of electricity in the liberalized sector has been steadily declining. the price of electricity for commercial demand. the cost of electricity has been decreasing steadily in Japan.enecho. by about 30 percent – during the period between the first half of fiscal 2000 and the first half of fiscal 2005.. The price of electricity for household customers. According to an up-to-date report released by the Advisory Committee for Natural Resources and Energy: Since the introduction of institutional system reform of the electricity industry in 1995. 17 10 . declined by about 13 percent during the same period.000 kW) by 2005 (Figure 8).

19 11 . to enhance enterprise value and attain growth under deregulation. electric utilities are trying to achieve sustainable development. TEPCO lost market share corresponding to 2200 million watts and Kansai Electric Power Company (KEPCO) lost 580 million watts since the liberalization of retail electricity sales in 2000. 18 “Toden wa Kawarerunoka” Nikkan Kogyo Shinbun 16 February 2006. Ministry of Economy. “Heisei 18 Nendo Denryoku Kyokyuu Keikaku No Gaiyo. March 2006.”18 January 2007 <www. Chubu Electric Power Company. On the other hand.meti. According to business plans released by the electric utilities. As one of the methods to achieve this goal. Trade and Industry. 18 Both firms have a strong sense of crisis about this situation. Under these business circumstances. Business Diversification of Electric Utilities in Japan Japanese electric utilities are facing a turning point originating from slow growth in demand for electricity and intensifying competition with phased expansion in the scope of deregulation of electric utilities.According to the Nikkan Kogyo Shimbun. electric utilities have diversified into non-electric business fields. and Kyushu Electric Power Company. Numerical targets for growth in non-electric businesses have also been set in the business plans of TEPCO.go.19 which would be the lowest level ever. KEPCO.pdf >. the annual growth rate in demand for electricity over the next 10 years is expected to be about 1 percent. deregulation also means the chance for electric utilities to expand their business activities into non-electric fields using their management resources.jp/press/20060330013/denryokukyoukyuukeikaku-set.

20 Commonly observed features are that most of the companies are conducting energy-related. 12 . personnel services. home security. have not improved drastically compared to fiscal 2002. The Progress of Diversified Businesses in Terms of Financial Data (2002 versus 2005) Figures 10 and 11 show the progress of the revenues and operation profits from sales in diversified businesses in terms of financial data between 2002 and 2005. and living environment-related businesses. and overseas) by applying selection and concentration and undertaking strategic development focused on fields associated with energy. for example. TEPCO set a goal of pursuing development in four strategic business areas (information and telecommunications. however. Annual Report 2006. According to company financial reports. housing evaluations and guarantees.In its management plan. and real estate. as can be seen in Figure 9. 20 Tokyo Electric Power Company (TEPCO). It may be possible to construe the following reasons for this: • The sales of most start-up businesses that have been established since 2000 are relatively small in scale. had 140 consolidated subsidiaries in 2005 versus 58 in 2002. Some companies are also embarking on nursing. energy and environment. except for a few companies. though. they make only a small contribution to overall business performance. TEPCO. living environment and lifestyle. • Some diversified firms prosper in business. IT and communications. both sales from diversification and the number of consolidated subsidiaries increased sharply during that period. As a general trend. because of their limited sales. Operation profits from sales of diversified businesses.

such as sales of electric appliances for gas instruments. As noted. gas companies have diversified into related business fields. most electric utilities have diversified into non-electric and unregulated businesses. such as Tokyo Gas and Osaka Gas. on the other hand. but also the influence of the reduction in electricity rates. Consequently. etc. the operating revenues and net incomes in the electric power business of the 10 privately owned regional electric power companies between fiscal 1995 and 2005 exhibited wavelike fluctuations. With the progress of deregulation in the electricity market. It seems that Japanese electric utilities are seeking for ways to expand their businesses into non-electric fields using their resources under deregulation and stagnation in demand for electricity. In addition. however. is relatively low. as shown in Figure 14. they attain almost the same profit/earning ratios as their core businesses. Comparatively. 13 . they tend to focus on core-related businesses. the component ratios of diversification businesses in consolidated sales account for more than 30 percent in gas companies.• Some information and telecommunications businesses are now gradually improving their corporate earnings. as shown in Figures 12 and 13. This reflected not only the stagnant economy and moderate temperatures. On the other hand. feature higher profit/earning ratios in diversified businesses than other electric power companies. For reference. Gas companies. The ratio of operating profits to sales in diversified businesses in each electric power company. the operating revenue and net income of TEPCO are also shown.

cannot be precisely evaluated because their segmental financial data are kept private. While they are striving to work with local communities for mutual harmony and benefit. This does not seem to indicate that they are attempting to become global firms. The performance of each of these. Business plans. To a greater or lesser extent. annual reports. most Japanese electric utilities are trying expand their businesses focusing on energy-related activities. European electric power utilities in advanced stages of deregulation are trying to concentrate on their core businesses. 22 14 . some of them are trying to expand overseas projects. They also recognize that the gas business has good synergy with them. and overseas activities.According to Yajima 21 : “Even though Japanese electric utilities have a tendency to emphasize diversification into information and telecommunications. however. the environment. information and communications. It seems rather that they are aiming at providing multi-utilities in regional societies. home security. Even though the segmentations and names assigned to them are not the same among electric power utilities. to the contrary. their diversified activities are classified broadly into energy. corporate brochures and other literature from Japanese electric power companies are cited in this section.” He also notes that: “Growth of the free cash flow resulting from a decrease of investment in electric facilities has been speeding the reduction of interest-bearing debt and electricity price and investments in new businesses” Diversification Strategy in Japanese Electric Utilities According to the business plans 22 of electric utilities. 21 Yajima 22-67. generally. and senior nursing care.and living environment-related businesses. the descriptions of the businesses are similar.

Diversified activities in Japanese electric power companies are in the process of trial and error before they achieve a favorable outcome. I think they will be able to a find better ways to diversify their businesses depending on their corporate strategies.Among the 10 Japanese electric utilities. As noted previously in this chapter. 15 . Based on segmental financial data. Chubu Electric Power Company. i. there has already been great improvement in the degree of dependence on the parent firms. Sales volume goals in diversified businesses are almost below 10 percent of the consolidated sales because of the huge size of the core businesses. KEPCO. the portions of diversified activities in consolidated sales are relatively small. To some degree or another. and Kyushu Electric Power Company have set concrete sales volume goals for diversified businesses.e. As the result of their explorations over the next few years. TEPCO. a lessening of the dependence of the diversified activities on inter-company transactions. they have been expanding their business fields for several years and have seemed to learn a number of things.. TEPCO and KEPCO also set profit goals and are especially active in diversification activities.

transmission. Secondly. ELECTRIC UTILITIES This chapter covers diversified business activities among U. Power marketers are entities that buy and sell electricity. cooperative. traditional electric utilities have generally been vertically integrated companies that provide for generation. publicly owned. <http://tonto. Non-utility power producers are also called independent power producers (IPP’s). 23 DOE/EIA. however.S.eia. 23 16 . transmission.pdf>. 2002. The traditional electric utilities are composed of investor-owned. Electric Utilities in the United States The electric power industry is divided into two categories: traditional electric utilities and non-traditional entities. Unlike traditional electric utilities. and federal utilities. investor-owned electric utilities. an outline of investor-owned utilities (IOU’s) and electric retail deregulation in the United States is briefly given as a background of diversification. “Electric Power Annual 2000 Volume II.CHAPTER 3 DIVERSIFICATION STRATEGIES OF U. such as power marketers and non-utility power producers. IPP’s do not possess transmission facilities or have retail electric sales. Under deregulation. or distribution facilities. but usually do not own or operate generation. they are changing from vertically integrated monopolies to functionally unbundled entities with a competitive market for power generation.” 29 November 2006. They are usually authorized to sell at market-base rates.doe. On the other hand.S. and distribution and energy services for customers in a designated area. the progress of diversification in various electric power companies is discussed.gov/FTPROOT/electricity/0348002. First of all.

The characteristics of U.000 electric utilities (excluding power marketers) in the United States.gov/cneaf/electricity/chg_stru_update/update2000. and distribution facilities in the nation. which owned most of the generation capacity. In the past. The Changing Structure of the U.24 Even though IOU’s represent less than 10 percent of the total U.doe.000 publicly owned electric utilities.There are more than 3.S. electric utilities are shown in Figure 15. 26 DOE/EIA. 25 24 Most of material in this section is derived from the DOE/EIA website. 2. In terms of number. At present. electric utilities. <http://www. vertically integrated IOU’s.doe. Electric Industry 25 As described above.” 22 January 2007 <http://www.” 22 January 2007. “The Changing Structure of the Electric Power Industry 2000: An Update. they generate almost 60 percent of the electricity produced by U.S. 26 17 . some 900 consumer-owned rural electric cooperatives.gov/cneaf/electricity/page/prim2/toc2. there are more than 200 investor-owned electric utilities.eia. “Electric Power Industry Overview.html>. the electric power industry has many new companies that produce and market wholesale and retail electric power.S. DOE/EIA.S. and 10 federal electric utilities.eia. transmission.pdf >. dominated power generation. the electric power industry in the United States is changing from a regulated to a competitive sector. number. They are in direct competition with traditional electric utilities.

29 DOE/EIA. This was due to the rise in prices for electricity primarily caused by increases in fuel costs. In 1999.gov/cneaf/electricity/page/fact_sheets/wholesale. 28. requiring utilities to file open access transmission tariff.” 18 .The Public Utility Regulatory Policies Act (PURPA) of 1978. These orders substantially forced utilities to restructure the electric industry. In addition.pdf>. EPAct meant that the electric power industry would evolve from a regulated monopolistic sector to a less regulated. and conservation.gov/cneaf/electricity/epa/epa. 28 27 DOE/EIA. PURPA established the groundwork for deregulation and competition by opening wholesale power markets to non-utility power producers.html>. demonstrated that generation of electricity is not a natural monopoly through the growth in non-utility power producers and IPP’s.eia. “Changing Structure. FERC also issued Order 2000 calling for the creation of regional transmission organizations (RTO’s).doe. 27 Liberalization in the electricity market began with the enactment of the Energy Policy Act (EPAct) of 1992 as a turning point. November 2006. which was designed primarily to encourage the use of renewable energy for electricity production. independent entities that control and operate transmission grids free of any discriminatory practices.doe. as well as for enforcing mandatory rules in the electric power industry to an electricity reliability organization (ERO) under FERC.” 23 January 2007 <http://www. 29 DOE/EIA.eia. the Energy Policy Act of 2005 (EPAct 2005) assigned the responsibility for overseeing operations. Electric Power Industry Fact Sheet” 22 January 2007 <http://www.”Wholesale Competition in the U. The Federal Energy Regulatory Commission (FERC) issued Orders 888 and 889. “Electric Power Annual 2005. energy efficiency.S. more competitive one.

and most of New England.wikipedia. 31 Since then.” 23 January 2007 <http://en. electricity deregulation in the United States has decelerated. were the first to open their retail electricity markets to competition.doe. however. and a reduction in competition. At that time. the electric industry faced an annual increase in demand of only about 2 percent after decades of rapid growth. Business Diversification Processes in Investor-owned Electric Utilities in the United States Electric utilities in the United States began to diversify significantly into non-electric and unregulated businesses in the early 1980’s. Wikipedia. while the cash was returned to investors as common dividends. Now other states are beginning with a limited number of consumers. Pennsylvania. because of the economic slowdown resulting from the oil crisis in the 1970’s. allowing customers to choose their electricity supplier. Many leading utilities experienced a reduction in construction expenses and looked for new opportunities to invest their extra cash flow. caused a slowdown in the pace of change. Some of them prepared to invest in new businesses. an increase in market regulation. 18 states have undertaken restructuring.gov/cneaf/electricity/page/fact_sheets/restructuring.As of now. ”Electricity Market. • Potomac Electric Power leased Boeing 747’s to KLM and Singapore Airlines.org/wiki/Electricity_market>.30 In 2000-01. The following examples will suffice to show diversified businesses in electric utilities.” 29 November 2006 <http://www.eia. States that historically had higher-than-average prices. New York. such as California. “Electric Power Industry Restructuring Fact Sheet. Some electric utilities changed their firms’ names to demonstrate that they were no longer no-growth firms. such as the California electricity crisis and the Enron debacle. DOE/EIA.html>. One of the major goals in restructuring is to lower the price of electricity. major failures. 31 30 19 .

IOU’s primarily invested in related areas such as fuel supply. Makhija. On the other hand. 32 From the historical viewpoint. By contrast. Edison Electric Institute.com/abstract=679039>. district heating. these non-utility activities generally had positive effects on the utility’s overall performance. Charles A. Some of these diversification activities stirred up controversy.• • • FLP Group Pacific Lighting acquired an insurance company. Consequently. 23 January 2007 <http://ssrn. it is also said that diversified investments have generally had a minor impact on utility performance and that the failed business efforts served as valuable lessons for utilities managers. Arizona’s largest saving and loan association. some diversification activities outside core businesses in the 1980’s produced widely publicized losses. Pacific Lighting Corp. and appliances. transport. "Can Diversification Create Value? Evidence from the Electric Utility Industry" 17 December 2004. Pinnacle West invested in Merabank. 33 32 Tomas Jandik and Anil K. brought a chain of drug stores. 33 20 . Dice Center Working Paper No. 2005-7.C: EEI. Diversified Business Activities of Investor-Owned Electric Utilities (Washington D. According to studies conducted by the Edison Electric Institute (EEI) in the early 1980’s. 1996) 1. some stakeholders take a dim view of diversification in general.

and diversification was more core-related. Other activities have been directed towards core-related areas including the sales and servicing of heating and cooling equipment. environmental and engineering consulting. real estate development. Diversified. Utility firms have taken advantage of their expertise in their core businesses and will likewise keep seeking ways to do so in non-regulated markets.and energy-related businesses was observed at this stage. and cable TV. domestic exempt wholesale generation (EWG) and cogeneration facilities. there seems to have been a tendency to go back to basics. About 80 percent of the 175 new subsidiaries/divisions were in core-related products and services. In the 1980’s. utilities focused on acquisitions outside their core businesses. As the background of global expansion. competitive pressure increased. Since EPAct went into effect. A remarkable increase in the number of subsidiaries with core. As of 1996. After the passage of EPAct in 1992. There were no signs of abatement at that point. 21 . These activities relied mainly on vertical integration and the sales of excess natural resources to other utilities. Then. insurance companies. EEI studies showed new subsidiaries/divisions engaged in diversified activities among 96 investor-owned electric utilities between 1992 and 1996. the slow growth rate and increasing competition in the domestic electricity market made the electric utilities pursue foreign opportunities so that they could utilize their experience and expertise in managing privately owned utilities. as mentioned above. This means that they invested in financial services. telecommunications. they had accelerated global expansion and such deals had been getting larger. utility diversification mainly focused on the need for guarantees on the supply of fuel for companies’ power plants.Until about 1980. 34 34 EEI. they have also been busy acquiring international businesses. in the early 1990’s. and electricity/gas brokering and marketing activities.

could be best explained by three terms: M&A’s. focusing on the energy business. “2005 Financial Review Plus 2006 Developments.org/industry_issues/finance_and_accounting/finance/research_and_analysis/financial_review/Finan cialReview. 2004). and create efficiencies and synergies. utility M&A activities have stabilized. and federal legislation affecting the structure of the sector. As mentioned previously. Recent trends in corporate strategy in the electric utilities. enlargement of scale. in particular.” 30 January 2007 <http://www. strengthen power in competitive markets. during the period from 1995 to 2005. enactment of stricter environmental regulations. It seems that most M&A’s were motivated by the desire to increase the scale and scope of business. the electric utility industry will face three major issues over the next five years: ongoing changes in regional transmission structure.pdf>. as shown Figure 16. in other words. (Washington DC: EEI. First. the trend of the electric industry since the 1990’s has been back to basics. EEI. In addition. After peaking in 2000. global expansion. and business diversification. 36 35 EEI. M&A activities in investor-owned electric utilities kept up a steady pace. 36 22 .eei. Business Profiles and Activities of Shareholder-Owned Electric Utilities. the move toward transmission reliability and stricter environmental regulations might involve additional costs and capital investments in the future.Recent Trends of Business Diversification Strategies in Investor-owned Electric Utilities 35 According to EEI reports.

electric utilities can be summarized as follows: • Most of the electric utilities strongly recognize energy and energy-related businesses as their core businesses and are trying to establish business platforms for growth and to improve their balance sheets by selling non-core assets and reducing expenses. most U. 23 . With the slow growth rate of demand for electricity and increasing competition. most such companies have continued to divest their non-core assets and refocus on their core businesses. and Asia. Business diversification strategies in U. however. they have begun to divest their overseas businesses or narrow down the target countries for investment to improve their balance sheets and focus on their domestic core businesses. Over the past several years. which generate about 60 percent of the electricity produced by U. concerning business diversification. over the past several years they have been continuing to exit or narrow down their overseas activities to focus on their domestic core businesses.S.S. Third. most of them had non-core businesses such as telecommunications or real estate. they invested in power plants and distribution companies to utilize their experience and know-how in managing privately owned utilities. electric utilities. Australia. electric utilities are continuing to exit from non-core businesses with great rapidity.Second. • Though most electric utilities expanded their overseas operations actively to pursue opportunities for attractive growth in the face of the slow increase in demand for electricity and greater competition in the 1990’s. Europe. in the 1990’s. As a result of examinations of business diversification trends among shareholder-owned electric utilities.S. IOU’s had positively accelerated global expansion in South America. Since 2003.

At the same time.• In order to cut expenses. some electric utilities tried to reduce the cost of benefits and the number of employees. 24 . the firms wanted to pursue market power and increase the scale and scope of business. so the number of M&A’s peaked around 2000 and has stabilized since then.

25 . generally speaking. while it is relatively easy to permit divesture because a significant concern is profit performance. U. most utilities have accelerated their exits from non-core businesses and begun to eliminate energy-related overseas businesses and/or narrow down target countries to improve their financial strength in the competitive market. the utilities diversified into energy-related and overseas businesses to utilize existing resources in view of the slow growth in domestic demand for electricity. and the number of utilities in the EEI index group of electric utilities declined more than 30 percent. • Since 2002. M&A’s were active. investors. Most M&A’s were undertaken to increase the scale and the scope of business. • In the 1990’s. • Among U. across the board. IOU’s have been opting for the latter alternative over the past decade or so. in particular. • Around 2000. To put it simply. from 98 in 1995 to 65 in 2005.S. the targets began to shift to energy-related businesses with the increase of competitive pressure as a result of EPAct in 1992. there might be two main choices: diversification into non-core businesses or back to basics.CHAPTER 4 LESSONS FROM PAST EXPERIENCES This chapter summarizes diversification activities in U. • There was diversification into non-electric businesses in the 1980’s.S. in the 1990’s.S. electric utilities are considered to be conservative shares. while. This trend can be explained as follows. so it is hard to allow risky diversification into unrelated businesses. IOU’s and Japanese electric utilities. As discussed in the previous chapter.

which include important implications and messages. Diversified 20.S.S. On the other hand. it is obvious that the success ratio of unrelated diversified activities has been extremely low. Few made large acquisitions in unrelated businesses. U. 26 . on the other hand. have not adopted this system.S. projects were undertaken with experienced operators. It seems to me that diversification activity trends in most Japanese electric power companies follow the business activities of U.S and Japanese electric utilities in the future. weaknesses. • • • Joint ventures were common. and regulations between the two countries. It is not necessarily appropriate. Many of them exited their less successful businesses.S electric utilities. and the business scale of each company is larger than that of U. corporate structures. cutting losses early. early entrants into growth markets. and there are some electric utilities including gas utilities and others under the control of holding companies. investor-owned electric utilities. as shown in Figures 17 and 18. This is because there are definitely differences in business circumstances. 37 EEI. and capabilities. They made careful appraisals of their new subsidiaries’ true strengths. diversification is also an important strategy for firms characterized by slow growth and intense competition in their efforts to pursue sustainable growth.S IOU’s have adopted the holding company system. to assure that similar trends will be observed among U. investor-owned electric utilities were fast-moving.As noted in Chapter 1. utilities. 37 • U. can be summarized as follows. Japanese electric power companies. however. Certain successful diversification strategies in U.

38 Porter. diversification is an attractive option to electric utilities. 27 .• They meticulously matched those skills and capabilities with joint venture partners and suppliers. diversified investments have generally had a minimal impact on corporate or utility financial performance and have provided a new impetus for corporate growth. Porter made several important statements about corporate strategy. and this is one of the reasons that corporate strategies fail. failed businesses offered valuable lessons for utility managers. Shareholders can readily diversify themselves. • They also undertook in-depth assessments of the purpose and role of diversification vis-à-vis core businesses. The corporation should examine this issue properly before embarking on the new venture. The new unit should bring some advantages to the corporation or the corporation should offer significant advantages to the new unit. and synergies or future value imparted to core businesses for having entered into the venture. On the other hand. In addition. venders. considering the financial aspects. For this reason. We should examine whether incorporating new diversified units would mean that the corporation is better off. It appears that some companies fail to do this adequately. Diversification inevitably adds costs and constraints to business units. or other parties needed to excel in the new market. 38 They are: • • • Competition occurs at the business unit level. any human resource issues.

are small in scale as compared with their electric utility businesses. over the past several years. and energy-related fields. This seems to be paradoxical. however. More recently. they have accelerated their exit from overseas businesses or narrowed down the target countries. overseas businesses. These operations. investor-owned electric utilities in an advanced stage of diversification have a tendency to focus on their energy-related businesses. and about half of their operations are intra-group transactions. they are seeking business opportunities overseas to utilize their experience in management of utilities. I think these companies have been exploring better ways to expand business fields into information technology and telecommunications. It should be remembered. it seems natural to me that Japanese electric power companies would try to explore diversification into non-electric businesses given the slow growth in demand and the progress of deregulation. they classify their business fields into three to five segments. 28 . however. that U. but I think these movements mean transition in firms. and this division is relatively similar among most Japanese electric power companies. It is said that Japanese electric power companies have recently been absorbed in diversification into non-electric businesses. In particular. At present. and most of them have attempted to exit from non-core businesses to strengthen their core business platforms and improve their balance sheets.S. with a central focus on the electric utility business. It does not seem to me that there are definite prioritizations among segmentations. living environment.CONCLUSION Business diversification is an essential corporate strategy for firms that have few prospects for growth. While some electric power companies advocate the importance of finding common interests with local communities. Also.

and experiences in new units/entities would provide a fresh impetus for a firm’s growth. The diversified firms should bring some advantages to the parent firm or the parent firm should offer some advantages to the new firms. they are in transition and need to identify synergizing businesses that they can hold for more than five years to give them a chance to grow. • I think it should be remembered that careful appraisal of new businesses and subsidiaries should be implemented before embarking on new ventures. these companies could identify some business fields as synergizing businesses and reexamine the effect of the incorporation of the new diversified units into the parent firm. most Japanese electric power companies have been exploring better ways to diversify into non-electric businesses with their management resources. • Based on the business diversification strategy. 29 . Business diversification would surely offer valuable lessons for utility managers. • I hope that. the gap in business performance might widen and distinctive features might be observed among electric power companies. • Some implications from past lessons show that business diversification should create values for the firms. it can be concluded that: • For the past several years under deregulation. for the next several years.From the foregoing. • At present.

I think one of the strengths of Japanese electric utilities would be intangible assets such as the corporate brand that is fostered with their customers based on stable electric supply over a number of years. such as the aging society and energy security. I think the performance of diversification in electric utilities depends on the quality and quantity of management resources. I believe that it is important to enhance a firm’s value through business diversification. and these activities can. At the same time. Hereafter. under deregulation I believe customer satisfaction will become a more important factor than ever. as well as management skills of private utilities. contribute to the quality of life. Whatever the case may be. 30 . The electric power sector is a key industry and is confronting various different issues.• From a long-term perspective. in the end.

Corporate Strategy(1965) Figure 2. Growth Vector Components Product PRESENT Mission NEW PRESENT Market Penetration Product Development NEW Market Development Diversification Source: Ansoff. Corporate Strategy(1965) 31 . Product-mission Matrix Product PRESENT Mission NEW PRESENT Expansion NEW Diversification Source: Ansoff.Figure 1.

Corporate Strategy (2005) Figure 4. Denryoku Jiyuuka ni katinuku Senryaku(2005) 32 . Montgomery. Pattern of Diversification Core business Closely related business Increasingly unrelated business Source: Collis. Business Deployment in Electric Utilities Upstream Power Generation Fuel Development Network Business Vertical Dimension Downstream Retail Business Domestic Neighbor Countries Foreign Countries Horizontal Dimension Electric Power Industry Energy Related Business Energy Un-related Business Regional Dimension Source: Yajima.Figure 3.

Montgomery.Figure 5. Corporate Strategy (2005) 33 . Unavoidable Trade-offs Among Modes of Expansion and Diversification Strategies Mode of Expansion Merger and Acquisition Speed Access to complementary assets Removal of potential competitor Upgrade corporate resources Internal Development Incremental Compatible with culture Internalizes learning Encourages intrapreneurship Alliances Access to complementary assets Speed Benefits Drawbacks Cost of acquisition Unnecessary adjunct businesses Organizational clashes may impede integration Large commitment Slow Need to build new resources Difficult to recover from unsuccessful efforts Add to industry capacity Lack of control Assisting potential competitor Questionable long-term viability Difficult to integrate learning Source: Collis.

Figure 6. Ten Electric Power Companies by Service Areas Source: The Federation of Electric Power Companies of Japan (FEPC) Figure 7. Changes in Electricity Sales for 10 Japanese Electric Power Companies 1000 TEPCO 900 800 700 600 (TWh) 500 400 300 200 100 0 1995 1996 1997 1998 1999 2000 Fiscal Year 2001 2002 2003 2004 2005 10 Electric Power Companies Total Source: FEPC and TEPCO Illustrated FY 2006 34 .

Figure 8. Staged Expansion in the Scope of Liberalization Source: TEPCO Annual Report 2006 35 .

Okinawa Electric Power Co. Chugoku Electric Power Co. Hokkaido Electric Power Co. Osaka Gas Co. Gas Company Tokyo Gas Co. Shikoku Electric Power Co. Electric Power Company Touhoku Electric Power Co. Hokuriku Electric Power Co. ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ × ○ × ○ × ○ × ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ × × Source: Corporate plans of Japanese electric power companies and major gas companies 36 . Kyushu Electric Power Co. Chubu Electric Power Co. Business Deployment in Japanese Electric Power Companies Housing Personel Real Estate Evaluation and Service Gurantee Business Business Business ○ ○ × × × ○ ○ × ○ × × × ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ × × × ○ × ○ × ○ × Classification Company Name Electric Power Gas EnergyRelated Communication Nursing Care Business ○ ○ × × × × ○ ○ ○ ○ × × Home Security Business × ○ × × × × ○ × ○ × × ○ Tokyo Electric Power Co. Kansai Electric Power Co.Figure 9.

The Progress of Revenue from Sales in Diversified Businesses Between 2002 and 2005 (Unit:Billion Yen) Tokyo Electric Power Co. Osaka Gas Co. Okinawa Electric Power Co. Shikoku Electric Power Co. Kansai Electric Power Co. Kyushu Electric Power Co. Chubu Electric Power Co. 37 . Tokyo Gas Co. Source: Financial data of Japanese electric power companies Revenue from sales in diversified businesses excludes intra-group transactions.Figure 10. 50 100 150 200 250 300 350 400 450 500 2002 FY 2005 FY Comopany Name Hokuriku Electric Power Co. Chugoku Electric Power Co. Touhoku Electric Power Co. Hokkaido Electric Power Co.

Chugoku Electric Power Co. Kyushu Electric Power Co.Figure 11. The Progress of Operation Profits from Sales in Diversified Businesses Between 2002 and 2005 (Unit:Billion Yen) Tokyo Electric Power Co. Kansai Electric Power Co. Tokyo Gas Co. Hokkaido Electric Power Co. Osaka Gas Co. Okinawa Electric Power Co. Chubu Electric Power Co. Source: Financial data of Japanese electric power companies 38 . Shikoku Electric Power Co. Hokuriku Electric Power Co. 5 10 15 20 25 30 35 40 2002 FY 2005 FY Comopany Name Touhoku Electric Power Co.

000 12.000 1995 1996 1997 1998 1999 2000 Fiscal Year 2001 2002 2003 2004 2005 Sources: FEPC and TEPCO Illustrated FY 2006 39 .000 6. Changes in Operating Revenue for 10 Japanese Electric Power Companies 18.Figure 12.000 4.000 TEPCO 10 Electric Power Companies Total 16.000 Billion Yen 10.000 14.000 8.000 2.

Changes in Net Income for 10 Japanese Electric Power Companies 800 TEPCO 10 Electric Power Companies Total 700 600 500 Billion Yen 400 300 200 100 1995 1996 1997 1998 1999 2000 Fiscal Year 2001 2002 2003 2004 2005 40 .Figure 13.

151 537 1.267 1. 5. Kyushu Electric Power Co. Okinawa Electric Power Co. Composition Ratio of Diversified Businesses in Consolidated Business Performance 2005FY Consolidated Consolidated Operating Operating Revenue Income ① Tokyo Electric Power Co.040 567 1. Tokyo Gas Co.402 157 1. Hokkaido Electric Power Co. Kansai Electric Power Co.660 481 1.066 ② 576 327 332 65 100 55 100 53 171 20 112 101 Diversified Business Operating Revenue ③ 360 220 109 24 168 15 76 53 90 14 368 458 Diversified Business Operating Income ④ 1 26 15 5 21 3 8 1 7 2 23 38 7% 9% 5% 5% 10% 3% 7% 9% 6% 9% 29% 43% 0% 8% 5% 8% 21% 5% 8% 2% 4% 8% 20% 38% ( Unit: Billion Yen) Company Name ③/① ④/② *Diversified business operating revenue: excludes intra-group transactions Source: Financial data of Japanese electric power companies and major gas companies 41 . Shikoku Electric Power Co. Chubu Electric Power Co. Chugoku Electric Power Co.Figure 14. Osaka Gas Co.579 2. Touhoku Electric Power Co.255 2. Hokuriku Electric Power Co.

Arizona. – Primarily producers and wholesalers. and other nonprofit entities are given preference in purchasing from them. and California. – Public power districts and projects are concentrated in Nebraska. Army Corps of Engineers. Investor-Owned Utilities (IOUs) Federally Owned Utilities Other Publicly Owned Utilities Cooperatively Owned Utilities Source: DOE/EIA The Changing Structure of the Electric Power Industry 2000: Updates 42 . provide service mostly to members. and the International Water and Boundary Commission. – Electricity generated by these agencies is marketed by Federal power marketing administrations in the U. – Most municipals just distribute power. – The Tennessee Valley Authority is the largest producer of electricity in this category and markets at both the wholesale and retail levels. – Serve at cost. they are financed from municipal treasuries and revenue bonds. incorporated under state law and directed by an elected board of directors which. transmission. return excess funds to the consumers in the form of community contributions and reduced rates. – Are granted service monopolies in specified geographic areas. – Power not generated for profit and publicly owned utilities. Electric Utilities by Type of Ownership Ownership Major Characteristics – Earn a return for investors. in turn. – Most are operating companies that provide basic services for generation. although some large ones produce and transmit electricity. Bureau of Reclamation. cooperatives. which in turn approve rates that allow a fair rate of return on investment. either distribute their profits to stockholders as dividends or reinvest the profits. Major Characteristics of U. – Irrigation districts may have still other forms of organization. Washington. – Have obligation to serve and to provide reliable electric power. – Producing agencies for some are the U. – Owned by members.S.Figure 15. and distribution. selects a manager. Department of Agriculture was established under the Rural Electrification Act of 1936 with the purpose of extending credit to co-ops to provide electric service to small rural communities and farms where it was relatively expensive to provide service.S. – The Rural Utilities Service in the U. – Are nonprofit state and local government agencies.S. – Are regulated by State and Federal governments. Oregon. voters in a public power district elect commissioners or directors to govern the district independent of any municipal government.S.S. the U. Department of Energy.

Number of Mergers and Acquisitions in U.Figure 16.S Shareholder-owned Electric Utilities 25 20 Number of Mergers and Acquisitions 15 10 5 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Fiscal Year Source: EEI Finance Department 43 .

Comparison of Major Electric Utilities in the United States and Japan Country Company Name Consolidated Edison Sales of Electricity (TWh) 29 37 103 289 147 Total Assets (Billion $) 25 10 55 113 55 USA Peco Energy Duke Energy Tokyo Electric Power Company Japan Kansai Electric Power Company Chubu Electric Power Company $1=115 Yen 131 48 (2005 or at the end of 2005) Sources: TEPCO ILLUSTRATED FY 2006 44 .Figure 17.

) 1 percent ---------Retail Electricity Liberalization since 2000(Staged Expansion) N/A Scale of Operation Electricity Demand (forecast) Company Structure System Deregulation Deregulation was decelerated since California energy crisis California Energy Crisis Enron Bankruptcy Other Events 45 .Figure 18. Comparison of Business Circumstances of Electric Utilities in the United States and Japan Item The number of Electric Utility United States 200 (Shareholder-owned) (Total 3000) Small (compared to Japan) 2 percent Holding Company System 18 States activate : Japan 10 Large (compared to the United States.

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