January 27, 2017 7:00 pm JST

Japan government wants ratepayers to subsidize utilities

Latest Fukushima scheme would also hit up new market entrants

TOMOHIRO EBUCHI, Nikkei staff writer

TOKYO -- Now that the estimated cleanup and other costs stemming from the 2011 Fukushima meltdowns has been significantly revised up, Japan's government plans to have new power providers shoulder part of the additional burden.

But these companies will actually be middlemen of sorts as the government tries to reach further into ratepayers' pockets.

According to the latest revision, the post-accident costs for Tokyo Electric Power Co. Holdings' Fukushima Daiichi nuclear power plant is estimated at 21.5 trillion yen ($187 billion). These costs include decommissioning the reactors and compensating affected residents.

Now that the new estimate has raised the compensation costs from 5.4 trillion yen to 7.9 trillion yen, the Ministry of Economy, Trade and Industry wants new power providers, none of whom has a nuclear plant, to shoulder some of the burden.

Under the scenario, the new utilities, which use the grids owned by major utilities, will pay a surcharge for their grid usage.

The newbies have been entering the market since 2000, when regulations began being eased. They were initially allowed to sell power to large, mainly corporate customers. But the entire market was liberalized last April, and the newcomers are now free to also serve households and small businesses.

The ministry allowed the public to submit opinions on the scheme until Jan. 17. Citizens groups are especially opposed to the plan, according to these submissions. Many took issue with the lack of a clear demarcation between where Tepco's responsibility ends and the government's begins. Some of these submissions also complained that the plan may distort competition in the power market and unduly favor nuclear power.

Currently, grid-usage fees represent 30% to 40% of a household's power bill. This will increase if providers pass on the added burden to consumers.

Of the estimated additional compensation costs, new utilities' burden would be in proportion to their share of the industry in terms how much power they sell. Assuming their collective share is 10%, they would together be hit up for 240 billion yen.

If all of this is passed on to households, each monthly bill will be an average 18 yen higher for the next 40 years, regardless of whether a household buys electricity from a legacy utility or a new entrant.

The industry ministry's rationale for this subsidy goes something like this: The compensation costs related to the triple meltdown have become excessive because the major utilities, which sold power from nuclear plants, failed to set aside enough reserves for such a contingency. The ministry now wants the utilities to retroactively collect this shortfall from everyone who was buying power from them until the disaster. The ratepayers subject to this levy include those who have since switched from major utilities to new entrants.

This reasoning was not favorably received by some members of the ministry advisory panel, which until late last year discussed the proposed framework.

Among the panel members, Minako Oishi of the Nippon Association of Consumer Specialists remained opposed to the plan until the end.

Toshihiro Matsumura, a University of Tokyo professor, grudgingly endorsed the plan while criticizing it as an "abnormal arrangement."

Mami Ito, the chief executive of Nihon Dento Kougyo, also approved the plan while voicing reservations. She said she is concerned that the plan may be hard for the public to swallow.

The ministry said it decided against collecting all of the additional estimated costs from the major utilities out of fear that ratepayers might abandon them for new power providers.

The industry ministry said it will try to mitigate the new burden on households by power bills can rise, asking large power providers to try to not raise grid usage charges and to try to cut costs.

The ministry also plans to have utilities indicate the new fee on bills.

Advisory board members still want the legacy utilities and government to explain why the companies failed to set aside enough emergency reserves; they also want the government to give further details as to how it reached the decision to make ratepayers fully responsible for the failings of industry executives.

"We need to make sure customers understand it well," said Satoru Katsuno, chairman of the Federation of Electric Power Companies of Japan.

Tokyo Electric Power Co. Holdings, Inc.

Japan

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