Gas pains

In the last three years, almost 30 cities in California have moved to reduce the use of natural gas in buildings, mainly through banning installations of gas lines in new structures. Last summer, the state legislature, in fact, approved energy standards that, while not actually prohibiting the use of natural gas, would greatly expand the use of electrical appliances for heating, cooling, and cooking in a move to greatly reduce consumer reliance on fossil fuels, including natural gas, which is considered a prime contributor to global warming. In December, New York City went California one better with an outright ban on fossil fuel combustion in future construction of residential and commercial buildings, thus bringing about the beginning of the end to gas use in the city.

This trend seems irreversible as more countries approach their deadlines for reducing greenhouse gases as dictated by various global agreements. Though some pundits insist that replacing natural gas with electricity will not solve climate change since electricity has to be generated somehow, and often through the burning of fossil fuels, the concerted worldwide push toward greater use of renewable sources will eventually obviate the need for these fuels. And, of course, the problems of natural gas go beyond its immediate and long-term effects on the atmosphere. Mining damages soil and water resources; gas is inherently dangerous and expensive to transport, whether across continents or across cities; and gas usage within homes is now known to cause health problems, including cancer. 

None of these issues entered into our decision to not use gas in the house we built in 2013 since “city gas,” as it’s called in Japan, is not accessible in the place where we built the house. However, it didn’t really bother us because we had had it with gas and even if it had been available we wouldn’t have used it. This attitude had less to do with worries about the environment than with our own preferences and convenience. Using it as a heating source, we’d always felt ripped off by Tokyo Gas, the monopoly in the places we rented up until 2013. The company is the perfect example of a capitalist enterprise that uses its stranglehold on a utility to bleed customers. Not only does Tokyo Gas (and probably every regional gas utility in Japan) overcharge for the gas itself, but it makes it so that the infrastructure that delivers the product requires serious investment. When we moved to a high-rise rental in Tokyo that had just been built, in order to use gas for heating we had to buy special stand-alone units for each room from Tokyo Gas because the piping system was unique to the building. Each unit cost as much as ¥45,000, and then when we moved out of the building more than ten years later and into a new rental that had gas heating from Tokyo Gas, we couldn’t use these units because the apartment we rented didn’t have the same system, even though it was built after the one we lived in previously. Tokyo Gas had already moved on, and there was no demand for the units we owned, so we had to throw them away.

Moreover, we had fallen out of the habit of deep frying foods at home or even grilling fish. If we wanted those dishes, we’d buy them already prepared at the supermarket. Mainly we were tired of scrubbing the burners and the range hood with steel wool, and storing and disposing of rancid cooking oils, and tended to associate these things with gas ranges and open flames. 

So our house is all-electric, the stovetops IH, which are easy to clean. That isn’t to say we couldn’t have gas in our lives any more, only that we couldn’t have natural gas. We could have liquefied petroleum gas, sometimes called propane, which is available everywhere in Japan, but that would require appropriate piping within the house, and when the builder suggested it to us we thought about it and declined, also mainly for aesthetic reasons. When we lived in Omiya for 3 years we rented a house that used LPG, and didn’t really like the sight of all those cannisters lined up outside under the kitchen window. So our decision to not use LPG in our new house was consistent with our dislike of natural gas: We didn’t want to use it for cooking or heating. We were through with open flames.

We’ve read that LPG itself has little negative effect on the environment, which is difficult to believe (though it burns “clean” it still emits CO2), but since it has to be delivered by truck to each home that uses it, it’s still environmentally problematic, and recently we’ve seen a number of press reports that make us doubly glad we didn’t opt for LPG. In a sense, the LPG distribution industry is even worse than the regional natural gas monopolies with their captive clientele. LPG companies have rigged the system in such a way that even though there is competition and in most areas consumers can choose among a variety of local distributors, once these companies get their hooks in you it can be very expensive to free yourself.

According to various industry PR sources, between 40 and 50 percent of the households in Japan use LPG, which is considerably more expensive than natural gas. According to an article that appeared about a year ago in the business magazine Toyo Keizai, one cubic meter of natural gas for household use costs on average ¥165, while a cubic meter of LPG is about ¥300. The same goes for collective housing: ¥176 for gas, ¥340 for LPG. In the Kanto region, which includes Tokyo and surrounding suburbs, the average monthly charge for 5 cubic meters of LPG per household in 2020 was ¥4,592, which also includes additional fees, while the equivalent in natural gas was ¥2,264. That’s an added cost of ¥27,936 a year. 

The basic reason for this discrepancy has nothing to do with the inherent combustion efficiency of either kind of gas, but rather with the market. Prices for natural gas are, in principle, set by the government. But LPG distributors can set their own prices, and most consumers are not aware that they can change distributors anytime they want. So why don’t distributors aggressively solicit new customers by persuading them to change companies with lower prices? Some do, but most don’t have to. LPG distributors work with developers, landlords, and realtors to game the system so that they can lock in customers for decades at premium prices. 

Toyo Keizai found that there tends to be tradeoff in gas prices the farther a residence is from a city center, and that the money one saves on rent by living far from urban environs is made up for by higher utility costs, usually because people who live in outer suburbs and the countryside have to use LPG. This difference becomes more obvious with non-rentals. The average age of the first-time home buyer in Japan is 37, and Toyo Keizai calculated that homeowners who used LPG paid over the lifetime of their home about ¥2.2 million more than homeowners who used natural gas. If the average home price in the Kanto area is ¥35 million, LPG costs are the equivalent of 6 percent of the price of their house. 

Why so expensive? Most single-family homeowners who purchase new houses do so through a developer, which buys the land in a subdivision and then constructs houses on it. If there are no gas lines in the area, local LPG agents often cover the cost of gas piping in the newly constructed houses, and if there is more than one agent in a given region, they can beat the competition by offering the developers rebates, which, according to Toyo Keizai, isn’t necessarily legal. Since piping and plumbing are one of the biggest expenses in house construction, developers can save a lot of money and pass this savings on to the buyers. 

The developer, of course, is expected to “recommend” the agent who provided the rebate to the buyer, who, not knowing any better, signs a contract with the agent through the developer. As with most contracts, the buyer doesn’t often read the fine print, which includes all sorts of fees in addition to the unit cost of the LPG itself. In fact, Toyo Keizai says that most LPG agents don’t even break the costs down on the monthly bill. They simply list the amount of gas used and the collective fees. A few don’t even break it down that much—they just tell you how much you owe. The irony here is that the homeowner is suddenly confronted with very high utility bills but usually doesn’t understand that they can shop around for a cheaper distributor because they just didn’t know they exist. Nobody told them.

Last December, Asahi Shimbun ran a series about the LPG industry that explained these marketing methods in more detail, since the government is demanding that agents be more “transparent” about their respective payment systems, which are usually based on a practice called kashitsuke haikan. Essentially, the agent installs the piping and the facilities (water heater, room heaters, etc.) for free with the understanding that they will get the contract with the new owner to provide LPG. If the new building is a rental property, the agent makes this deal with the landlord and/or realtor. The owners then sign a contract that locks them into buying LPG from the agent for a long time, sometimes up to 20 years. Moreover, they make up for the cost of installing piping and facilities by charging the owner “rent” for those facilities. At the moment there are no laws covering LPG facilities, so the agents can charge whatever they want. Naturally, landlords and realtors pass this expense on to their tenants, but homeowners simply get it added directly to their monthly bill, and if it isn’t clearly explained, the owner may not understand why the bill is always so high. 

Asahi says that consumer protection groups receive thousands of complaints a year about their LPG bils, which is why the government is now looking into the matter. One Hokkaido co-op that helps students find affordable rental housing discovered that the difference between LPG charges from one agent to another can be as much as 2.3 times, with “fees” accounting for about one-third of the monthly bill. As it stands, the ministries of land and of industry have asked both agents and realtors to clearly explain to their customers how LPG billing works, but there is no legal mandate that forces them to do so. For their part, the LPG agents association has said they would prefer not to charge homeowners for piping, but they have to work with developers in order to promote their business. A lawyer who has worked on the issue told Asahi that in many cases realtors and LPG agents work together on rental contracts that sidestep competition, and consumers are left in the dark. 

But since there is no legal restriction on LPG fees and contracts, there is also no limit on competition, and another article in the Asahi series described how one salesman in Ome, Tokyo, visited homes that had contracts with a rival agent and explained how the owners could save between ¥3,000 and ¥4,000 a month by changing to his LPG distributor. One 31-year-old owner, who had bought his home a year earlier, was under the impression that if he changed agents he would have to pay a cancellation fee, which was ¥210,000. He had also been instructed by the developer which agent he had to sign with. After talking to the salesman, he became suspicious, since the developer said nothing about competition or the fact that he would be charged for “renting” the piping in his own home. Feeling deceived, he broke his contract and starting patronizing the new agent. When he received a notice from the previous agent demanding ¥210,000 he refused to pay and the agent sued.

In court, the owner explained that he bought his new house already built, meaning he didn’t order it to be built, and therefore he assumed that he owned everything in it, including the piping for gas. The court ruled in his favor, saying that since no representative of the LPG agent was present when he signed the contract with the developer, the contract wasn’t binding. 

A lawyer told Asahi that these kinds of cases are becoming more common, and more judges are finding for the defendant since the owner isn’t properly informed of the conditions of the LPG contract. From 2009 to 2021 there were about 200 such suits, and 80 percent found in favor of the owner/user.

Another development that seems to be bad news for the LPG industry is that renters are also resisting these extra fees. The Hokkaido co-op mentioned above recommends rental housing to about 1,500 students a year, and many complain about the exorbitant LPG fees, which often include charges for the installation of water heaters and air conditioners, which the users think should be paid by the landlord or the realtor, which often acts as a property manager. The co-op is now demanding that LPG agents and realtors provide greater transparency in their contracts and that explanations be provided to tenants and not just landlords, who can simply pass the costs on. Consequently, in June of last year the government told the LPG agents association that they must make sure that renters understand all the ramifications of a contract before they sign. As with their relationship with developers, the agents association complained that landlords and realtors “demand” they install facilities for free, and thus they are viewed as being “subsidiaries” of real estate companies. Apparently, that excuse doesn’t wash any more. 

4 comments

  1. Lee · March 1

    Hi,

    Another interesting article.

    I don’t know anything about LPG here in Australia because we’ve never used it.

    Our house has both electricity and natural gas which the Ozzie’s here refer to as “gas” not to be confused with petrol (gas or gasoline to Yanks).

    As we export lots of natural gas to foreign countries at fixed prices and amounts those contracts have to be honoured first.

    And a while back there was a problem with actually coming up with those contracted amounts so it resulted in a shortage of natural gas in the country pushing up prices.

    Furthermore, the left wing government here in Victoria banned not only fraccing, but exploration and drilling for onshore natural gas for a number of years which also reduced the supply.

    So the price of natural gas exploded upwards and we were paying about two and a half to three times as much as people in Japan.

    This January our natural gas plan came up for renewal and the price of the basic first usage step went up by 38% and the other steps by “only” 25%.

    The monthly service fee also went up by about 25% as well.

    Ridiculous.

    So we shopped around using the government energy compare website and found a cheaper supplier.

    While the supply charge per day is higher than what we are currently paying, the cost for natural gas is much lower than the new plan.

    We also have a solar hot water system, but it currently isn’t working and is just a pile of junk now.

    The cost to repair it is around $500 so it really isn’t worth doing as we don’t use much hot water any more.

    The bills for natural gas are primarily for heating in late fall, winter, and spring.

    And of course our house leaks heat like a sieve as when it was built energy was cheap.

    So this coming heating season the combined inverter air conditioners /heaters are going to be used first with only limited use of the natural gas central heating.

    Frankly speaking, it just costs too much to heat the entire house with only the two of us in it.

    We are wasting money heating the entire 3000 square feet of space.

    We never had that problem when we lived in Japan.

    Like

  2. Angela · March 1

    Please keep ’em coming, Philip. These are fascinating articles, and for those of us who don’t read articles in Japanese, we would have no idea about these things. It is good for those of us who tend to associate ‘natural’ with eco-friendly, to work to wean ourselves off another greenhouse gas, and maybe rethink whether being in an ‘all-electric’ house is better. The problem in apartments is we don’t have the choice of solar, even if we own the unit, so here’s hoping that solar will quickly develop in a way that it can be a bolt-on to walls, or incorporated into windows before too long.

    Like

    • Lee · March 4

      Angela,

      If you research the Internet you can find plans for homemade window type solar air heaters. They aren’t supposed to be to hard to put together and given the climate in Japan they would probably work quite well.

      Like

  3. Scott · March 1

    A Stanford study, recently published, found that methane is leaking from our gas stoves when turned off. If that weren’t alarming enough, it would seem the gas producers fail to follow safe procedures and knowingly vent huge amounts of methane. So, in addition to your detailed report of the downstream monopolies in Tokyo, it would appear to be a poor choice for our planet’s future.

    https://www.npr.org/2022/02/03/1077392791/a-satellite-finds-massive-methane-leaks-from-gas-pipelines

    Liked by 1 person

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