About 20% of these companies by late November had been forced to withdraw from the business or file for bankruptcy, according to Tokyo business research company Teikoku Databank.
Some of those that remain have stopped signing up new customers, the data provider said.
Japan’s electricity market had been an oligopoly made up of a handful of players owning everything from power plants to transmission facilities.
That changed in 2016, when markets were liberalised and electricity upstarts began taking on the entrenched majors.
Their share in overall power sales increased to about 20% by volume at one point.
But higher fuel prices, mainly driven by the prolonged war in Ukraine, are hammering these new market entrants.
The number of new utilities withdrawing from the power business jumped to 33 in November, from three at the end of March, according to Teikoku Databank.
Those filing for bankruptcy or terminating their business totalled 22, a 60% increase over the same period.
The rising numbers are coming right before the arrival of winter, peak demand season.
Even new utilities affiliated with big Japanese companies have been forced to suspend operations.
NTT Docomo, the nation’s leading mobile carrier, stopped signing new contracts for Docomo Denki, a residential power supplier.
The main cause is the war in Ukraine inflating the prices for natural gas and coal, which are burned in thermal power plants.
The trading prices of the electricity generated by these plants have remained elevated on Japan’s power market.
On Monday, spot prices at the Japan Electric Power Exchange averaged about ¥22 per kilowatt hour, up about 60% from the year-earlier level.
Many of the new utilities have no power plants and instead purchase power from other sources, including the wholesale market.
Many are currently having to purchase electricity at prices higher than what they have contracted to sell it to homes and businesses.
So as their sales grow, so do their losses.
This has forced many of them to forego taking on new customers and downsize, a trend that began in the spring.
Meanwhile, major regional utilities have been slow to pass on their rising costs to ratepayers.
As a result, residential power bills have remained relatively low.
Likewise, the new entrants, who gained their competitive advantage by charging low rates, have not been able to pass on their rising costs, including for gas.
When fuel prices might come down remains anyone’s guess, but the new utilities, which not so many years ago heralded a liberalised power market, are at a turning point.