In the debate on reshaping the power grid, industrial firms are starting to call for a separation between generating electricity and transmitting it, but utilities seem intent on protecting their regional monopolies.

“We need to think seriously about spinning off and freeing the major power companies’ transmission segments,” says Nippon Paper Group Inc. President Yoshio Haga.

Haga’s voice is just one in a growing chorus urging a reorganization of the 10 regional fiefdoms that dominate the supply of electricity. A separation like the one he is proposing would enable firms with substantial in-house generating capacity to expand their generation businesses.

Although deregulation has allowed new players into the business of selling electricity – JX Holdings Inc. subsidiary JX Nippon Oil & Energy Corp. is one example – most industrial firms use their generators only to power their own facilities. The 10 regional electric companies are just too strong. Besides high fossil-fuel prices, payments to utilities for using their power grid make the business unprofitable for newcomers.

Separating power generation from transmission would lower this cost barrier. It would also allow industrial firms to take flexible approaches like powering their Tokyo headquarters with electricity generated at factories far from the capital.

Now that building new nuclear power plants has become a difficult prospect, many voices say Japan needs a variety of energy sources – such as wind, solar, fuel cells, and compact gas turbines – dispersed over smaller regions. Separating generation and transmission is also a necessary step toward a smart power grid, advocates say.

In response, electric companies argue that the status quo is the “most efficient” way to keep the lights on, in the words of Tokyo Electric Power Co. Chairman Tsunehisa Katsumata.

Their fiercely guarded independence is affecting how manufacturers prepare for a summer that is expected to bring power shortages in eastern Japan.

Is Tokyo Electric “going to buy surplus power in the summer or not?,” says a chemical industry executive. “It’s about time for Tepco to make its attitude clear.”

In the early days of the crisis at the utility’s Fukushima Daiichi nuclear power plant, the Ministry of Economy, Trade and Industry asked steelmakers, paper mills and other industrial firms with powerful in-house generators to be ready to supply surplus power. But many have yet to receive a formal request from the power provider known as Tepco.

A senior Tepco official says the company will keep purchases of electricity from outside industries “to a minimum.”

Tepco has given a number of ostensible reasons for not wanting to buy outside power, including concerns about quality. But the company’s go-it-alone stance suggests a sense of alarm over the debate on rolling back regional electric monopolies.

(The Nikkei May 4 edition)