December 3, 2016 4:22 am JST

Tokyo seeks cost swap on nuclear compensation

New power providers would receive cheap output from big utilities in exchange for pay-ins to fund

TOKYO -- Japan's industry ministry will propose a scheme in which new power providers gain access to low-cost electricity from regional utilities in exchange for contributions to a fund for victims of the Fukushima nuclear disaster.

The idea behind the arrangement is to keep these contributions from driving up new providers' prices and encourage the kind of competition that brings electric rates down overall.

Around fiscal 2020, the big utilities would be required to release so-called base-load power -- electricity generated from cheap, round-the-clock capacity, typically coal and nuclear plants -- to the Japan Electric Power Exchange. They now sell base-load power through their own retail channels and make only higher-cost output from oil-fired and other peak power plants available on the exchange.

Generating costs run to about 10 yen (9 cents) per kilowatt-hour for nuclear and around 12 yen for coal, compared with more than 30 yen for oil.

Japan's retail electricity market became fully deregulated in April. Many of the country's more than 300 independent power providers have no way of generating electricity on their own and depend on exchange-traded output to supply their customers. These newcomers' lack of access to cheap base-load power makes for an uneven playing field against the regional utilities, such as Tokyo Electric Power Co. Holdings, which have lost their monopolies but retain a capacity advantage.

The Ministry of Economy, Trade and Industry wants them to release the equivalent of 30% of new providers' power needs below cost. Right now, the regional utilities have more output from coal than from nuclear, but the latter's share could rise as more idled reactors come back onstream.

At the same time, METI wants new power providers to share around 3 trillion yen ($26.3 billion) in compensation costs with regional utilities.

Financial compensation for people whose lives or businesses were disrupted by the Fukushima Daiichi meltdowns is now expected to reach 8 trillion yen -- far more than the 5.4 trillion yen previously forecast. Most of this cost has been borne by Tepco, which operated the ruined plant, with additional contributions from Osaka-based Kansai Electric Power and other regional utilities with nuclear capacity.

These contributions began after the March 2011 disaster. The 3 trillion yen shared burden would represent provisions that utilities should have made before Fukushima. To recoup this cost, which dates back to the time when all households bought electricity from regional utilities, METI wants new power providers to be included in order to collect from all of today's users -- except in Okinawa Prefecture, which has no nuclear power plants.

The shared contributions would be collected as an add-on to the fees that both utilities and new power providers pay for the use of transmission infrastructure. These fees are based mostly on usage levels. Since new power providers account for 8% of nationwide electricity sales, the additional burden is estimated at several hundred billion yen. Pay-ins to a decommissioning fund for reactors other than those at Fukushima Daiichi will also be tacked on to grid charges, adding tens of billions of yen more to new providers' costs.

If new providers pass along all of these additional costs to their customers, monthly household electric bills could rise by several yen to tens of yen.

"The benefits of being able to procure cheap power would outweigh the cost burden," a senior METI official said.

Members of a METI expert panel could make a decision on the scheme as early as next week. The ministry intends to propose new legislation if needed.

(Nikkei)

Tokyo Electric Power Co. Holdings, Inc.

Japan

Market(Ticker): TKS(9501)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 6,618.82M
Shares: 1,607.01M

The Kansai Electric Power Co., Inc.

Japan

Market(Ticker): TKS(9503)
Sector:
Industry:
Utilities
Electric Utilities
Market cap(USD): 13,106.01M
Shares: 938.73M

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