February 3, 2014 1:00 pm JST

Japan household power rates up 15% since '11 quake

TORU HATANO, Nikkei staff writer

Tepco may face a challenge from smaller suppliers charging lower rates.

TOKYO -- Average household electricity rates in Japan have risen about 15% since the country's earthquake and tsunami disaster of March 2011, according to the rates planned for March released Thursday by the nation's 10 electric utilities.

     The increase is largely attributable to the weaker yen and increased fuel costs for thermal power generation, an alternative to nuclear energy, being passed on to consumers. 

     Utilities raise electricity rates by either gaining approval from the Ministry of Economy, Trade and Industry or by using the fuel cost adjustment system, which automatically reflects the price fluctuations of raw materials and fuel.

     The rates planned for March reflect price hikes based on the fuel cost adjustment system. They were calculated based on the average fuel price for the October-December quarter of 2013. For that quarter, crude oil prices were up 1.5%, liquefied natural gas prices were up 3.5% and coal prices were up 0.5% from previous quarter. The September-November quarter of 2012 was used to calculate the February rate. The March hike will represent the second straight monthly increase.

     The average household electricity rate set by the utilities was 7,477 yen ($71.9), up 44 yen on the month and up 999 yen from March 2011. The household rate of Tokyo Electric Power (Tepco) was 7,963 yen, up 27.3% from March 2011.

High gas costs     

A big factor driving the rates higher is costly liquefied natural gas for thermal power generation. Not only is the fuel being used more following the halt of nuclear power plants after the 2011 disaster, but also the unit price is surging due to the weaker yen and rising trade prices.

     The 10 utilities used a total of about 55.95 million tons of LNG in 2013, up 36.5% from 2010. The fuel was priced at 85,277 yen per ton in December 2013, up 79.4% from December 2010. Some of this increase is being passed on to consumers.

     The feed-in tariff system, which forces utilities to buy renewable energy at fixed rates and was introduced by the government after the quake disaster to diversify Japan's energy sources, is also to blame for the higher rates. Purchases of renewable energy are financed by a surcharge paid by consumers. Currently, the surcharge is 0.4 yen per kilowatt-hour, which translates into a monthly burden of 120 yen per household. That burden is expected to swell in fiscal year through March 2015.

     Six utilities -- Tohoku Electric Power, Shikoku Electric Power, Hokkaido Electric Power, Kansai Electric Power, Kyushu Electric Power and Tepco -- have already raised electricity rates since obtaining government approval. Chubu Electric Power is also considering raising its rates on April 1 and has applied to the government to raise the household rate by 4.95% and the corporate rate by 8.44%. All 10 utilities will start adding the 3% consumption tax increase to their rates in May.

     Amid the ongoing weak-yen trend, a restart of nuclear power plants could send power rates lower again. Sixteen reactors at seven utilities have applied for nuclear safety checks so far, but none have passed yet.

     Said Kansai Electric Power President Makoto Yagi: "We will consider lowering rates if we can restart nuclear reactors."

     But it will not be until spring at the earliest that an idled Japanese reactor will be brought back online for the first time. That means electricity rates may remain high for a while.