Panel tells Tepco not all costs can be passed on, so lower rate hike

Kyodo

An industry ministry panel proposed Thursday that Tepco reduce costs it plans to pass on to customers as part of its plan to raise electricity rates, suggesting the targeted 10.28 percent hike for households will be lowered.

In a report released the same day, the panel did not recommend a specific rate hike percentage to Tokyo Electric Power Co., whose finances were shattered by the Fukushima No. 1 nuclear plant disaster. But sources said the rate hike could be less than 10 percent, as the report calls for expenses earmarked for repairs to power generation facilities to be reduced, and for Tepco to review the so-called business return rate it uses for interest payments and dividends.

Based on the panel’s proposals, Tepco is expected to submit a revised rate hike plan to Economy, Trade and Industry Minister Yukio Edano, who must grant his approval, and is hoping to increase charges Aug. 1.

The utility applied May 11 to raise household electricity rates by an average 10.28 percent, based on estimated total annual costs of ¥5.72 trillion on average in the three years from fiscal 2012.

Utilities are allowed to pass on the costs of generating power to household customers, including fuel and personnel expenses.

The panel said it screened the costs under the assumption that Tepco would not be allowed to pass on such expenses as advertisements for purposes other than the public interest, as well as donations the utility has made to various entities.

As for personnel expenses, the panel acknowledged that Tepco’s calculations are reasonable but noted there are “strong calls to further reduce the wage level,” as the utility will soon receive a ¥1 trillion injection of public funds and effectively be placed under state control. The panel also accepted the need to pass on expenses to maintain the crippled reactors at the Fukushima No. 1 plant in a stable condition, as well as costs to outsource clerical work related to compensation claims related to the accident.

Tepco has vowed to cut more than ¥3.37 trillion in costs during the 10 years from fiscal 2012, but has said it still needs to resort to a rate hike due to surging fuel costs for thermal power generation while all its nuclear reactors remain idle.

In addition to the upcoming injection of taxpayer money, hiking electricity bills is seen by Tepco as one of the main ways to turn around its business.