More than 60 percent of major new entrants to the electric power industry object to the government’s plan for them to shoulder some of the compensation costs stemming from the Fukushima nuclear crisis, a recent Kyodo News survey showed.
Of the 44 utilities surveyed, 29 said the plan by the Ministry of Economy, Trade and Industry could have a negative impact on their businesses or prevent liberalization of the retail electricity market.
Last April, Japan freed up the retail electricity market, ending the decades-long monopoly of Japanese regional power companies. The new entrants are those that joined the industry after the liberalization of the market and are expected to promote competition, paving the way for lower electricity bills and new services.
But the ministry decided in November last year on a plan to let the utilities share the burden of the aftermath of the nuclear crisis at Tokyo Electric Power Company Holdings Inc.’s Fukushima No. 1 nuclear power plant, devastated by meltdowns triggered by the 2011 earthquake-tsunami disaster.
Meanwhile, 70 percent of the new entrants said they were able to win customers as planned or even more. The survey shows that while the liberalization of the market has proceeded relatively smoothly, systematic problems remain.
A total of 266 companies were registered as new electricity retailers as of March last year. The newcomers include gas suppliers such as Tokyo Gas Co. and Osaka Gas Co., major oil refiner JX Nippon Oil & Energy Corp., telecommunications service provider KDDI Corp. and railway company Tokyu Corp.
Kyodo News sent questionnaires to 50 major new retailers of which 44 responded.
About the ministry’s plan, 13 retailers said that it will have negative effects on their business, while 16 said the plan will have certain effect on the business. Only one company said that it did not expect any effects.
The ministry has deemed users should shoulder their share of the burden as they have widely benefitted from nuclear power before the crisis but 18 companies said they did not agree with the ministry.
A total of 30 companies said that the number of customers they have acquired so far reached or topped initial goals while 11 said that they were not able to win customers as expected.
The survey found that 41 companies were satisfied that they had entered the electricity retail market because they were able to connect well with customers which contributed not only in boosting profitability but also in enhancing the recognition of the companies. No company said it regretted entering the market.
On future management, 18 said they will expand their business operations while 8 companies said they will maintain the status quo. No companies said they will pull out of the market or consider scaling down operations.
Meanwhile, Japan’s energy sector saw more deregulation with the city gas market freed up Saturday, allowing major utilities to enter the market and enhance competition with gas company rivals in the industry.
Utilities including Chubu Electric Power Co. and Kansai Electric Power Co. have launched special websites introducing their lower gas price plans.
But compared with the liberalization of the retail electricity market, the gas retail market has attracted fewer entrants.
METI proposed that TEPCO would start a subsidiary to manage all its nuclear plants. Saying it would facilitate restarting the reactors at the Kashiwazaki Kariwa NPP, as since the beginning of the Tepco-owned Fukushima Daiichi nuclear plant disaster the government planned to use profits from the Tepco-owned Kashiwazaki-Kariwa NPP to finance the Fukushima Daiichi disaster costs; and that it would also encourage collaboration among other utilities nuclear power plants, and make merger or sale easier. METI thinks such change would also encourage the public to support nuclear reactors restarting.
As the total decommissionning costs could double, Tepco would also like the rules to be changed so as not take an added large loss on their books.
One day later Hitachi announced that they consider merging their nuclear business with Toshiba and Mistubishi.
These recent new developments show Japan nuclear industry on the defensive, former PM Koizumi warned the Liberal Democratic Party could lose the next election if it focuses on the nuclear power issue.
“Japan is considering having new electricity suppliers shoulder some of the cost of compensating those affected by the 2011 Fukushima Daiichi meltdown — a first since the market was opened up to companies besides the big regional utilities.”
The cost of scrapping Fukushima Daiichi will remain squarely on Tepco’s shoulders.
TOKYO — Japan is considering having new electricity suppliers shoulder some of the cost of compensating those affected by the 2011 Fukushima Daiichi meltdown — a first since the market was opened up to companies besides the big regional utilities.
The expense has been covered by interest-free government loans to Tokyo Electric Power Co. Holdings, which operated the disaster-stricken nuclear plant. This debt is being repaid not only by Tepco, but also other major power companies such as Kansai Electric Power and Chubu Electric Power. Some 6 trillion yen ($57 billion) has already been paid out, more than the 5.4 trillion yen estimated in fiscal 2013, and the total is expected to rise by trillions of yen.
With consumers gradually switching from regional utilities to independent power providers, the Ministry of Economy, Trade and Industry plans to ask these new players to pay a share of the compensation. Details such as how to split the burden between established and new power providers will be worked out going forward. New suppliers’ customers will be asked to contribute as well, on the grounds that they used nuclear power before the market opened up, though this could meet with a backlash from some of the companies affected.
But the cost of scrapping Fukushima Daiichi will remain squarely on Tepco’s shoulders, and the ministry will not approve rate hikes to recoup these expenses. Annual outlays are expected to soar to hundreds of billions of yen, from 80 billion yen now, once Tepco starts extracting melted fuel from the reactors in the 2020s.
The ministry plans to set up a fund to cover decommissioning costs, with the money to come from Tepco’s yearly profits. The utility will be permitted to draw from the fund to cover approved decommissioning plans. Funding gaps will be covered by government loans to be repaid by Tepco.
The company will be exempted for the time being from a requirement to cut electricity transmission charges levied on electricity retailers if profits from power transmission and distribution rise too high. The aim is to avoid placing a further burden on taxpayers while ensuring that decommissioning goes smoothly.
In the event of a serious nuclear accident, the government is considering capping the liability of electric power companies and placing the burden beyond that on the public in the form of taxes or higher electricity rates.
The Cabinet Office plans to submit the plan to an experts’ panel along with the current program, which does not contain such caps, sources said.
The experts’ panel will start to discuss both from Oct. 3 and issue the results of its discussions within this fiscal year, which ends in March 2017. After that, the science ministry will consider revising the related laws, they added.
In the accident at the Fukushima No. 1 nuclear power plant in March 2011, the compensation paid by the operator, Tokyo Electric Power Co., has reached 6 trillion yen (about $60 billion).
The amount is much higher than the 120 billion yen in total that can be currently covered by a private insurance program and governmental expenditures.
Because of that liability, electric power companies are asking the government to place a cap on the compensation they must pay at the time of serious nuclear accidents.
According to the sources, the setting of an upper limit would require utilities to shoulder a considerably higher amount of compensation.
In the event that the actual compensation exceeds that amount, the utility would also have to pay the portion beyond the limit if the nuclear accident is completely attributable to their actions.
If the nuclear accident is mainly caused by natural disasters, however, the portion beyond the upper limit would be chiefly covered by governmental compensation and only a part of that portion would fall on the utilities, depending on the extent of their culpability.
The government’s compensation would be eventually shouldered by taxpayers.
The push to set a cap is apparently being led by the belief of electric power companies that now is a good time to ask the public to share part of the burden with the prevailing mood in the current administration to restart nuclear reactors.
However, some experts say that if an upper limit is adopted, electric power companies will become less concerned about safety.
“There is a possibility that those companies will place less importance on investing in safety measures,” said Tadashi Otsuka, professor of law at Waseda University, an expert on environmental laws and compensation systems.
The government is moving to bill new electricity suppliers for a portion of nuclear reactor decommissioning costs and compensation payments related to the Fukushima nuclear disaster, it was learned on Sept. 7.
After decades under regional utility monopolies, the electricity supply market was opened to competition in April this year. The government apparently fears that the old monopolies such as Tokyo Electric Power Co. (TEPCO) lose too many customers to new suppliers and they may no longer be able to cover the high costs of decommissioning old reactors or compensate the victims of nuclear accidents, hence the move to shift some of the financial burden onto new market entrants.
However, these costs were originally supposed to be covered by the nine big utilities, and the government’s moves would essentially transfer that burden onto the Japanese people, making a clash more than likely.
Under the current system, large utilities must cover nuclear reactor operating expenses — including eventual decommissioning — from electricity bill income. Also, TEPCO receives monies to cover Fukushima nuclear disaster compensation claims from the government-licensed Nuclear Damage Compensation and Decommissioning Facilitation Corp. (NDF), which is in turn funded by all the large utility companies.
The new system being considered by the government would spread the financial burden of nuclear accident compensation and reactor decommissioning to new electricity suppliers, lightening the load on the big utilities. The government estimates the total cost for reactor decommissioning plus Fukushima nuclear disaster compensation paid before the NDF was established at some 8 trillion yen. The new power suppliers would likely pass on their share of these costs to their customers, resulting in monthly power bills up to about 200 yen higher than at present for an average three-person household.
However, forcing customers of the new electricity firms to pay for the old utilities to decommission their reactors and for TEPCO’s nuclear disaster liabilities runs counter to the goals of liberalizing the electricity market, which was intended to push down prices through competition. It would also in essence be corporate welfare for the big utilities operating nuclear plants.
A sub-committee to debate the new system will be established under the Advisory Committee for Natural Resources and Energy reporting to the minister of economy, trade and industry. The committee will decide on what direction to take by the end of this year, with an eye to submitting a bill to revise the Electricity Business Act to the ordinary Diet session next year.
Protesters including shareholders hold up signs criticizing Tokyo Electric Power Co. executives in front of the Yoyogi First Gymnasium where the utility held its annual shareholders’ meeting on June 28.
Shareholders call on utilities to abandon nuclear energy
Japan’s nine major electric power companies faced renewed calls to end their dependence on nuclear energy at their annual shareholders’ meetings on June 28.
However, as such proposals require approval by a two-thirds majority of shareholders with voting rights for passage, all were expected to be rejected.
A total of 73 motions from shareholders were submitted at the meetings of the nine utilities. Many called on the companies to leave nuclear power generation.
But executives again stressed the need for nuclear plants to turn a profit.
At the shareholders’ meeting held by Kyushu Electric Power Co., President Michiaki Uriu said: “We have been able to secure a profit due to the resumption of operations at nuclear plants and a large decrease in fuel costs. We will work toward an early resumption of operations at the Genkai nuclear plant (in Saga Prefecture).”
Kyushu Electric Power resumed operations last year at two reactors of the Sendai nuclear power plant in Satsuma-Sendai, Kagoshima Prefecture, in southern Kyushu.
Kansai Electric Power Co. also resumed operations at two reactors at the Takahama nuclear plant in Fukui Prefecture in central Japan this year, but the Otsu District Court issued a temporary injunction to halt them.
“We will make every effort to gain the understanding of society, starting with local residents,” President Makoto Yagi said at the Kansai Electric Power shareholders’ meeting on June 28. “Nuclear plants are an important energy source from the standpoint of economics and environmental issues. We will implement a cut in electricity rates as soon as possible through an early resumption of operations.”
At the Tokyo Electric Power Co. Holdings Inc. meeting, President Naomi Hirose said: “We will proceed with measures to allow us to work on the important corporate issue of resuming operations at the Kashiwazaki-Kariwa nuclear plant (in Niigata Prefecture).”
Hirose also apologized for a delay in announcing that meltdowns had occurred at the Fukushima No. 1 nuclear power plant after the Great East Japan Earthquake and tsunami struck in March 2011.
Members of the Nuclear Phase-Out TEPCO Shareholder’s Movement handed out fliers in front of the venue for the TEPCO meeting.
Yui Kimura, 63, a leading member of the group, criticized the revelation about covering up the meltdown at the Fukushima plant.
“TEPCO is trying to resume operations at the Kashiwazaki-Kariwa plant without taking responsibility for the accident,” Kimura said.
Another shareholder, Fusako Iwata, 66, from Gifu Prefecture, said: “At that time, the public believed without question what the central government and TEPCO said. We will not be deceived again.”
Utilities reject shareholders’ call to abandon nuclear power
Japan’s nine major electric power companies shot down renewed proposals calling for them to end their dependence on nuclear energy at their annual shareholders’ meetings on June 28.
The top executives of each utility again stressed the importance of nuclear power and indicated that they plan to resume such operations at their plants as soon as possible.
At the Tokyo Electric Power Co. shareholders’ meeting, President Naomi Hirose apologized for his predecessor’s instruction to employees to avoid using the term “meltdown” during the early phases of the March 2011 disaster at the Fukushima No. 1 nuclear power plant.
“I sincerely apologize for causing concerns,” Hirose said in responding to a question from a shareholder. “I promise that we will never impose silence on our employees under any circumstances.”
TEPCO described the condition of the Fukushima reactors as suffering less serious “core damage” for two months after the Great East Japan Earthquake and tsunami crippled the plant.
Seventy-three motions from shareholders were submitted at the meetings of the nine utilities. Many called on the companies to end nuclear power generation.
However, since proposals require approval by a two-thirds majority of the voting rights of participating shareholders for passage, all were rejected.
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