The Ministry of Economy, Trade and Industry plans to lift the ban on the retail supply of electricity generated at small private power facilities, METI officials said Wednesday.

The measure was to be proposed at Thursday's meeting of an advisory panel as a way to encourage more companies to enter the power retail market and spur competition, in turn leading to lower energy costs, the officials said.

The proposal is designed to enable companies with private power facilities that supply factories and other users to extend their transmission lines to provide excess energy to nearby factories and commercial facilities.

Initially targeting large-lot users, the proposed measure will allow electricity users a wider choice of power suppliers, the officials said.

New suppliers entering the partially liberalized market have so far been limited due to the high fees charged for using the existing transmission networks of the 10 major electric power companies.

Companies with their own distributed power sources are effectively prohibited from supplying excess energy outside their premises except for subsidiaries and other affiliated users and within limited areas under government permission.

Because most of the power sources are thermal power generators that use fuel oil and coal, METI plans to require the envisaged suppliers to take environmental measures, the officials said.

METI is eyeing the future use of power generation based on fuel cells, they said.

The utilities subpanel of the Industrial Structure Council is deliberating ways to further open up Japan's power retail market with an eye to full liberalization within five years.