1. System design for partial liberalization on electric industry Rules related to use of networks Establishment of a fair and transparent transmission rules ・ Notification of connection provision agreement and change orders ・ Basic rules pertaining to the establishment of transmission fees *Prevent non-liberalized users from being adversely affected *Make it so that it is not extremely difficult for specific-scale electric enterprises to receive connection supply ・ If an electric company refuses to use networks without justifiable reasons, the government may issue connection supply orders Supply by electric companies Negotiated prices Supply by new entrants Competitive relationship Basic rule Exceptions Supply of electricity by electric companies to users in the non-liberalized sector ・ If price reduction and other measures that increase user profits are implemented, the government will abolish the approval system and change it to system of filing notifications. If there is unjust discrimination, the government will issue change orders. ・ In addition to basic menus, menus that users can select under a fixed condition (options/optional agreements) will be diversified as much as possible. Business of supplying electricity by using electric companies’ networks ・ Business notification system ・ No supply obligations ・ No price regulation Introduce competition in the direct supply (retail) of electricity and make the overall electric industry more efficient by establishing an environment that would allow users to choose suppliers Purpose of System Design Creation of a specific- scale electric enterprise system(new entrants) Others ・ To promote the creation of rational prices through negotiations between relevant parties, the government will abolish the wholesale supply approval system and change it to a notification system ・ Abolition of regulations on side businesses and a shift to a system of filing notifications of facility transfer permits: To respect the autonomy of companies and to enable efficient management such as the effective use of resources, the government will ease regulations such as abolishing side business regulations Provisions for review ・ The government shall examine the law’s enforcement status three years after the introduction of the law, and carry out necessary countermeasures. Supply by electric companies Electricity demand whose supply will be liberated (large- scale) establishment of an environment enabling users to choose suppliers ・ Supply will be liberated for extra high voltage users (those who use more than 2,000kW of electricity in principle, and take power at 20,000V or above) ・ Those who will be included in the liberalization sector are about 30% of users in terms of electricity usage volume, and roughly 8,000 users in terms of the number of contracts. Views on establishing the scope of liberalization Views on establishing the scope of liberalization Supply of electricity by electric companies to liberalization-sector users ・ Prices will be negotiated, as a basic rule ・ Electric companies will assume the final security obligation and provide electricity to those who cannot receive electricity from any source (orders related to the notification and change of final security agreement) ・ To prevent cross subsidies from regulated activities to competitive activities, the administration will check the electricity rates, and also check revenue and expenditure by sector, using the actual business results Mechanism to prevent cross subsidies Mechanism to prevent cross subsidies Electricity demand whose supply will not be liberated (medium- to small-scale) protection of users from monopolized supply Final security (notifications of final security agreement; change orders) Attachment A/ Annex 1