Japan’s biggest and third biggest regional electricity utilities are set to combine their fossil fuel plants under a joint venture due to be set up in April.

Tokyo Electric Power Co. and Chubu Electric Power Co. will transfer operations of their existing thermal power plants to a new joint venture, creating a huge thermal power company with a dominating market share.

The joint operation will allow a significant cut in fuel and other costs. The utilities are also expected to realize economies of scale in repair and maintenance work.

The combined output capacity of their existing thermal power plants was nearly 70 million kilowatts as of March 2014 — more than half of the total thermal power generation capacity of Japan’s 10 regional electric companies.

The tie-up agreement is the main driver behind Tepco’s rehabilitation plan approved by the government in January last year following the 2011 Fukushima nuclear plant disaster.

Japan Times reports that under their agreement, thermal power generation operations will be transferred in several years to the fifty-fifty joint venture to be established in April, sources close to the matter said Saturday.

Up until now both sides had continued to discuss what to do with their existing plants.

Chubu Electric have now agreed to Tepco’s proposal of expanding the operation of the new venture, as the utility is likely to face a difficult business environment with the full liberalization of Japan’s retail electricity market next year.