There is an impression that LP gas (propane gas) prices are considerably higher than city gas.
This is because there was a bad business practice of ``free lending of housing-related equipment.'' The Ministry of Economy, Trade and Industry has published guidelines for making LP gas rates transparent and has announced a policy to eliminate this business practice.
This time, we will provide an overview of the measures to prohibit the addition of equipment costs for LP gas, and the measures that rental owners should take.

Why LP gas is more expensive than city gas

According to a survey by the Agency for Natural Resources and Energy (FY2013), the price of LP gas is 1.86 times higher than city gas.
It is undeniable that gas prices for LP gas are higher than for city gas because of the costs associated with transporting and installing gas cylinders, as well as installing gas pipes and alarms for each door.
However, this alone cannot explain the 1.86 times difference in gas prices.

In fact, this price difference is caused by the LP gas industry's bad business practice of adding on equipment costs.

What is the addition of equipment costs?

LP gas charges consist of a basic charge and a consumption charge that is added depending on the amount of gas used, but depending on the property, equipment costs such as gas pipes may be added.
It can't be helped if the equipment is necessary for installing LP gas, but we also provide services (free of charge) for housing equipment not related to LP gas, such as air conditioners, water heaters, delivery lockers, security cameras, and intercoms with TV monitors. In some cases, the cost may be added to the LP gas bill.

Rental owners can install housing equipment for free, so there have been cases where they have openly asked LP gas companies to install air conditioners and delivery lockers free of charge. As a part of their sales activities, LP gas suppliers also had the advantage of increasing the number of contracts by increasing the number of facilities they installed free of charge.
Since LP gas prices can be set freely by service providers, even if these equipment costs are added, it is difficult to understand from the outside, and there is no legal way to regulate them.

Tenants are the ones who suffer from the added equipment costs.

Tenants are the ones who suffer the most when equipment costs are added to the LP gas bill.
LP gas charges are not disclosed at the time of moving in, and there have been cases where the gas charges were abnormally high after moving in due to the low rent.
A survey by a university co-op found that in some cases, the difference in LP gas charges was nearly 6,000 yen.

It is not common for LP gas rates to be disclosed at the time of tenant recruitment, and it was difficult for tenants to compare and consider LP gas rates, so they had no choice but to pay the LP gas rate presented to them after moving in. This is cited as one of the reasons for the rampant increase in price tags.

Measures to eliminate bad business practices in LP gas

Under these circumstances, at the Ministry of Economy, Trade and Industry's LP gas working group held in July 2023, measures were formulated to make LP gas rates more transparent.
It is expected that new penalty provisions will be established, and it looks like this will be a very effective initiative.

Measures announced at the Ministry of Economy, Trade and Industry working group

According to an announcement by the Ministry of Economy, Trade and Industry, in the future, it will be mandatory to clearly state the breakdown of the basic charge, metered charge, and gas-related equipment charges for LP gas charges, and regulations will be put in place to prohibit the addition of equipment costs unrelated to LP gas. The plan is to revise the ministerial ordinance.
It was announced that they will work on a new system design in collaboration with related ministries and agencies, with the aim of implementing it from 2027.

As a result, LP gas prices, which were previously high due to equipment charges, are expected to drop considerably.

Other efforts towards LP gas price transparency

Tenants are virtually unable to choose an LP gas service provider, and must use the LP gas installed in the property and pay the fees charged. It is unfair to tenants that there is a business practice in which LP gas charges are not disclosed before occupancy.
Therefore, in 2021, the Ministry of Land, Infrastructure, Transport and Tourism issued a request to real estate companies and real estate-related organizations to provide information on LP gas rates before moving in. In addition, the Ministry of Economy, Trade and Industry has requested that LP gas companies provide information on LP gas rates to owners of rental properties and real estate management companies.
The latest measures go beyond simply requesting information, and are more in-depth regulations with penalty provisions, so the LP gas industry and rental owners are under pressure to take countermeasures.

Impact of ministerial ordinance amendments on rental owners

The specific content of the revised ministerial ordinance is expected to become clear in the future, but the ban on adding unrelated equipment costs will likely have a considerable impact on rental owners.
If you have equipment such as air conditioners or water heaters that were previously covered by your gas bill, you may need to discuss with your LP gas supplier what will happen to them in the future.
Also, depending on the setting of LP gas rates, it is likely that recruitment will be affected, and in some cases, you may have to consider changing your LP gas supplier.

Possibility of increased equipment costs

If unreasonable equipment cost increases are prohibited, rental owners will now have to pay for equipment installed by services.
In a sense, things have returned to normal, but the big question is whether the increased costs can be reflected in the rent.
When setting the rent, you will need to consider how to deal with it while looking at the surrounding rent market, but in the worst case scenario, the rent may be left unchanged.
Additionally, since LP gas companies will not be able to recover the costs of the equipment they currently have installed through gas charges, they are expected to negotiate with rental owners to cover the difference. It is safe to discuss measures with your LP gas supplier as early as possible.

Price competitiveness of LP gas rates affects tenant recruitment

In the future, information on LP gas prices will be increasingly disclosed, and there will likely be increased scrutiny of whether there are any unfair price increases.
When a tenant chooses a property, whether the LP gas charges are high or low is a major deciding factor.
If this happens, there will be price competition in LP gas prices, and if prices do not come down, you will have to consider changing your LP gas supplier.

Depending on the contract details, there may be penalties when changing gas companies.

When changing your LP gas supplier, you will need to double check your current contract details. In some cases, there are cases where customers are being charged a large penalty fee when canceling their contract, causing trouble. Since it is common business practice to add on equipment fees, it would be a problem if the contract was easily canceled, so it seems that a penalty clause is often included.
The larger the property, the greater the trouble you will have when canceling the contract, so it is a good idea to consult with a specialist such as a lawyer in advance.

Take prompt action while paying attention to future trends

Since the policy prohibiting additions to equipment costs has only recently been announced, many people are likely to wait for concrete measures to be taken.

First of all, you are required to discuss the future outlook with your LP gas supplier and re-create a business plan that includes reviewing (or leaving unchanged) LP gas rates, equipment costs, and rent. There is still time until the revised ministerial ordinance comes into effect, so please remain calm.