Japan Shifts to Annual Revisions of Wheeling Charges Under Revenue Cap System

The Electricity and Gas Market Surveillance Commission (EGC) plans to revise wheeling (transmission) charge calculation methods under the revenue cap system for the second regulatory period (FY2028–FY2032), shifting from the current flat five-year structure to annual revisions. The move aims to stabilize the earnings of transmission system operators (TSOs), as costs have recently risen and profits have declined in the last few years of the regulatory cycle. The EGC also proposed presenting the annual wheeling charges for the full five-year regulatory period upfront, in order to give electricity retailers sufficient time to prepare. Discussions on system design for the second regulatory period are scheduled to conclude by early 2027.

The committee also reviewed investment during the first regulatory period, which was below commitments. TheTransmission and Distribution Grid Council (TDGC) projected that total transmission investment over the five-year period would reach only 80–90% of originally submitted plans, citing project changes or cancellations by connecting customers and delays in land acquisition negotiations. Substation investment was estimated at 70–90% due to longer equipment lead times. Distribution investment was projected at around 80%, affected by lower housing starts and reduced renewable energy connection volumes. Underground utility line projects were expected to reach only around 50% of planned levels.

🔍 Shulman Commentary:

Wheeling charges are a key mechanism for TSOs to recover grid investment costs. Moving to annual revisions would allow rising costs to be reflected more directly in tariffs. While more frequent adjustments could reduce cost predictability for retailers, accelerated grid investment is likely to create opportunities for equipment and infrastructure providers.