Tepco gets OK to raise electricity rates 8.46%

Deal frees up ¥1 trillion in public funds for embattled utility

Kyodo

The government on Wednesday approved a request from Tokyo Electric Power Co. to raise household electricity rates by an average 8.46 percent from Sept. 1 to help the utility overcome its financial plight stemming from the Fukushima No. 1 nuclear power plant disaster.

Tepco decided to shave one-hundredth of a percent off the government’s target figure of 8.47 percent after recalculating the costs it plans to pass on to consumers in its service area, including Tokyo, a company source said.

Due to the prolonged government screening process of its rate hike plan, Tepco said it now expects to receive ¥1 trillion in public funds next Tuesday, about a week later than originally scheduled.

“We have not met some of the conditions (for receiving the capital injection) up to this moment, so the payment period will be revised based on an agreement between the company and (a state-backed bailout) body,” Tepco said in a statement.

The capital injection, which will put the utility effectively under state control, and the electricity rate hike are among the key measures stipulated in the utility’s 10-year comprehensive restructuring plan.

In May, Tepco applied to the government to raise household electricity rates by an average 10.28 percent from July 1, citing increasing fuel costs for thermal power generation to make up for the suspension of nuclear power generation because of the Fukushima crisis and subsequent reactor shutdowns nationwide.

But the government called on the utility to reduce the hike to about 8.47 percent, based on the screening process involving experts and consumer groups.

While winning government approval is a relief to the cash-strapped company, Tepco President Naomi Hirose expressed concern last week over how its business may be adversely affected by not being allowed to raise charges as initially sought.

Under the restructuring plan, the utility is forecast to start logging a net profit in the business year ending in March 2014.

The plan, however, largely relies on whether the utility can increase revenues by raising electricity prices and restart its idled nuclear reactors in Niigata Prefecture from next April, an apparently daunting task amid heightened public concerns over the safety of nuclear power.

After the utility receives the ¥1 trillion of taxpayer money Tuesday, financial institutions are expected to provide ¥370 billion in additional loans the next day.