Measures to Address the Heavy-Load Winter Season for FY20212021/11/24

JERA Co., Inc. (“JERA”) has, based on this winter’s electricity supply-demand outlook, drawn up measures to address the heavy-load winter season (December 2021 to February 2022).

Last winter, factors such as a sharp increase in electricity demand caused by intermittent cold weather and a decline in LNG inventories that curbed power generation led to a tightening of electricity supply-demand. In addition, the government's supply-demand verification report indicates that, with respect to the electricity supply-demand balance for this winter, an electricity reserve margin of at least 3% is expected to be secured for all periods and areas but notes that if monitoring of actual power capacity anticipates a deterioration in the supply-demand balance then the government and relevant organizations are to cooperate in taking measures to address supply-demand.

In order to avoid a recurrence of last winter’s fuel constraints and tightening of electricity supply-demand, JERA is taking measures to secure both “kW” (securing power capacity and conducting targeted inspections of power generation facilities) and “kWh” (supplying power to the electricity market and securing fuel).

1. Measures to secure “kW”

1-1. Securing power capacity

In order to secure power capacity for this winter, JERA has secured additional supply by adjusting the schedule for repairs and inspections of thermal power plants in the Tokyo and Chubu areas that had been planned for winter. In addition, having successfully bid in TEPCO Power Grid Incorporated’s “Public Auction for Additional FY2021 Winter Power Capacity,” JERA is moving forward with preparations to resume operations at Unit 5 of the Anegasaki Thermal Power Station, which was under a long-term planned shutdown.

1-2. Conducting targeted inspections of power generation facilities

In addition to strengthening internal systems, JERA is working to mitigate the risk of power generation facility outages through soundness checks and targeted patrols of boilers and other priority equipment.

2. Measures to secure “kWh”

2-1. Supplying electricity to the electricity market

JERA procures fuel through a combination of long-term contracts and spot transactions in response to fluctuations in electricity supply-demand. In order to avoid last winter’s fuel constraints and tightening of electricity supply-demand, JERA believes it is important that the global fuel supply-demand situation be clearly reflected in bid prices on the Japan Electric Power Exchange (“JEPX”) domestic electricity spot market and that appropriate price signals be sent to the market.

As a procurer of fuel, therefore, JERA has revised its power supply contract with TEPCO Energy Partner, Incorporated to become a direct bidder on the JEPX spot market and begun doing so this November. In addition, JERA will revise its approach to marginal cost as reflected in bidding prices on the JEPX spot market for the Tokyo area to incorporate the price of additional fuel procurement such as LNG spot procurement.The revision will start after the date of confirmation by the Electricity and Gas Market Surveillance Commission.

In the Chubu area, JERA has already acted as a direct bidder and reflects the price of additional fuel procurement in its bidding price. As a result of the continuation of this initiative, JERA's JEPX spot market bid price will increase when additional fuel procurement prices rise and decrease when they fall.

2-2. Securing fuel

Given last winter’s experience, JERA procures fuel based on its own electricity demand estimates. JERA will continue with this approach, which has contributed to stable fuel procurement that flexibly grasps changes in electricity supply-demand. In addition, JERA will continue to procure additional LNG necessary for the stable supply of electricity and will voluntarily secure and maintain a higher inventory level of LNG during the heavy-load winter period. Based on the current outlook, JERA believes taking these measures will enable it to contribute to a stable supply of energy with a low likelihood of fuel constraints.

At the same time, there is a limit to what JERA’s efforts alone can achieve. In order to ensure a stable domestic fuel supply, JERA asks the government of Japan to urgently consider systemic aspects of ways to balance electricity liberalization and resource acquisition as well as rational market design, supply responsibility, and cost sharing.

JERA aims to avoid fuel constraints this winter through measures to secure both “kW” and “kWh.” In cooperation with related parties, the JERA group is making every effort to secure a stable supply of energy.