The deal would see Hitachi -- which declined to comment on the story -- take a majority stake in the new business and appoint its chief executive, Japan's leading Nikkei business daily reported without citing sources.
The news comes as Japanese Prime Minister Shinzo Abe, fresh from Sunday's landslide parliamentary election victory that rekindled his political capital, pledged to pursue economic policies that include cutting red tape.
Electricity power generation and sales in Japan -- which had been monopolised by 10 regional utilities -- have been partly deregulated and will be fully liberalised in 2016 under Abe's plan.
Separating power generation and transmission businesses is also being considered.
The developments are key to the Hitachi-ABB joint venture which is hoping to tap into the market for electricity transmission equipment, the Nikkei said.
The new firm may build smart grids -- electricity networks based on digital technology that improve efficiency in supply and costs -- for utilities, it added.
By joining forces, Hitachi and ABB also hope to compete on a stronger footing with US engineering titan General Electric and other overseas giants in the global market, it said.