Japan's power monopolies take first steps toward competition

* Tokyo Gas eyeing Tepco gas-fired plants

* Government is pushing to open up electricity market

* Japan's regional monopolies report more losses

TOKYO, Oct 31 (Reuters) - Japan's power companies, still reeling from last year's Fukushima disaster, are taking their tentative first steps to embrace competition that may end the regional monopolies that have supplied electricity since World War Two.

Tokyo Gas Co, Chubu Electric Power Co and Electric Power Development Co said on Wednesday they had approached Tokyo Electric Power Co, operator of the wrecked Fukushima nuclear plant, on potential alliances covering construction of fossil fuel power stations, fuel purchases and retail electricity sales.

Tepco, taken over by the government this year, is saddled with billions of dollars of compensation and clean up costs that make investment in new stations all but impossible. That opens up an opportunity for competitors to increase market share.

Tepco is expected to hold auctions as early as the end of March 2013 to contract out construction of three coal-powered plants with a total capacity of 2,600 megawatts.

``Tepco's plan is a step in line with the government policy to bring in more competition in Japan's power market by introducing a bidding process in the construction of power plants,'' said Toshinori Ito, president of Ito Research and Advisory and a member of a government panel on deregulation of the power market.

``The move has started at financially troubled Tepco, but could spread to other electric power companies.''


Tepco Managing Executive Officer Muramatsu Mamoru said on Wednesday 10 companies had applied to become partners after it set up a unit to seek alliances. He declined to identify the companies.

Tepco said it lost 2,550 corporate customers in the six months to Sept 30.

An earthquake and tsunami in March 2011 caused three reactor meltdowns at Tepco's Fukushima Daiichi station, triggering the worst atomic disaster in 25 years. It forced 160,000 people from their homes and prompted the government to adopt a policy that aims to end reliance on nuclear power and open up competition.

Each of Japan's 10 regional monopolies controls everything from power generation to transmission in its own service area, an arrangement that allows them to easily shut out competitors.

Resistance from the monopolies stalled deregulation in the 1990s, but that is changing as the government pushes through measures from simplifying procedures for building power stations to introducing subsidies for renewable energy.

Tokyo Gas, traditionally a supplier of city gas, is increasing output of electricity and has sold power to utilities in western Japan for the first time, it said on Tuesday, when it announced earnings. The company said it expected electricity sales to rise 18 percent in the year to March 31.

``I think it's important for us to get involved in building new plants or replacing old ones to spur competition in the market,'' Tokyo Gas President Tsuyoshi Okamoto told reporters.

The company is aiming to increase power generation to 5,000 megawatts by 2020.

Tokyo Gas hopes to work with Tepco on upgrading two of its plants near Tokyo, the 3,600 MW Sodegaura station and the 1,150 MW Minami-Yokohama station, both of which are located near LNG terminals operated by the gas company.

A Chubu Electric spokesman said the company may consider trying to sell power ``some time in the future'' in areas covered by rivals, though the industry's main concern now was to meet winter demand.

Power utilities recorded big losses this week, brought on by an increased reliance on oil, gas and coal to run power stations with all but two of Japan's 50 nuclear reactors still shut for safety checks and upgrades after Fukushima.

Eight regional monopolies had combined losses totalling 674 billion yen ($8.47 billion) for the six months to Sept. 30, according to earnings statements. Okinawa Electric Power Co , which operates no nuclear power stations, and Hokuriku Electric Power Co reported profits. ($1 = 79.5800 Japanese yen)

(Additional reporting by Osamu Tsukimori; Editing by Aaron Sheldrick and Ron Popeski)