Japan should overhaul its power sector, dominated by regional monopolies, to promote competition and a stable power supply, according to a draft proposal issued on Friday by a panel of experts set up after the Fukushima nuclear disaster.

The report advocated sweeping reforms, including "unbundling" the regional utilities' grip on the transmission Of electricity as well as generation, and opening up the retail power business supplying households and other small-lot users.

Utilities and the politicians and civil servants allied with them have long argued Japan's system of regional monopolies that own both power plants and transmission grids ensured vital stability in the electricity supply.

But that argument was undercut by rolling blackouts after a the March 11, 2011 earthquake and tsunami that devastated Tokyo Electric Power Co's Fukushima Daiichi atomic plant. And broader public confidence in utilities that had touted nuclear power as safe has since been shredded.