1. INTRODUCTION -

Historically, the Japanese gas and electricity markets could best be described as a collection of regional monopolies, each with its own energy champion (the “Japanese Incumbents”). In more recent times, the Japanese Government has determined that both the electricity and gas markets should be de-regulated and open to competition, and this process is accelerating.

In other jurisdictions (the US and the UK being excellent examples), de-regulation of the gas market has typically led to significant pain for the relevant incumbents, and in most cases, multiple arbitrations and disputes as the incumbents, having lost significant market share, seek to avoid making Take or Pay payments for gas that they no longer need.