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Power industry outlasts DPJ

Nobody was more pleased than the electric power industry when Prime Minister Yoshihiko Noda made the surprise announcement Nov. 14 that he would dissolve the Lower House and call a general election. The industry hoped that this would clear the way for terminating the rule of Noda’s Democratic Party of Japan.

The power industry had felt harassed by the DPJ ever since the party came to power in 2009 and especially after the March 11, 2011, disaster at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear power plant.

Especially annoying to the industry was the party’s call for reforming the electricity supply system by separating the generation and distribution of electricity and fully liberalizing the electricity market.

A panel of experts established within the Ministry of Economy, Trade and Industry adopted basic policies in July for separating the generation and distribution of electricity and completely liberalizing the retail delivery of electricity to households. This led the power industry to resort to time-buying tactics to prevent a concrete decision from being finalized by yearend. It was convinced that if discussions on reform continued into the new year, the DPJ’s reform programs would be overturned.

According to an insider, the industry figured that once the Liberal Democratic Party regained the reins of government (which it will on Dec. 26), any attempt to reform the power industry would have to start from scratch. It was inconceivable that the LDP would revise relevant laws along the script lines prepared by the DPJ.

Alarmed by the power industry’s move, some reform radicals within METI thought of letting power suppliers compete with each other before the reform discussions wrapped up. They hoped to make the separation of power generation and distribution and the liberalization of retail delivery a fait accompli that could not be reversed even if the government changed.

The power industry countered by insisting that inducing competition among individual power companies was premature because of uncertainties about their ability to supply power in a stable manner. The power companies asserted that the supply situation is in a state of emergency with all but two of the nation’s nuclear power stations being kept offline since the Fukushima disaster. But it is generally known that the power industry, with its current reliance on thermal power generation, has sufficient capacity to meet the country’s electricity needs.

The industry also took advantage of the lack of consistency in the government’s plan to reduce Japan’s reliance on nuclear power. It kept telling METI that discussions on reform of the supply system should not be held as long as the government could not decide on the future ratio of nuclear generation to the nation’s power supply.

As a result of Noda’s dissolution of the Lower House, the plan to reform the power industry will inevitably be emasculated. Indeed, LDP chief Shinzo Abe has called for restarting the now-dormant nuclear power plants within three years.

One power industry insider said that while the proportion of nuclear generation in the country probably won’t return to what it used to be, Japan will not become a “zero nuclear power” anytime soon. That means existing major power companies will survive as long as they can operate nuclear power plants and that, even if competition in the electricity market is promoted, newcomers that depend entirely on thermal power generation will lose.

The government is pushing the study of geological faults near nuclear power plants to determine whether they are active — a key factor in judging whether a nuclear power plant should restart. A series of incidents staged by power companies have delayed geological surveys, and the new government looks set to decide which nuclear plants should go back online.

The power industry is also seeking to gut the DPJ-initiated rule of limiting the life of nuclear plants to 40 years. “We will ask the government to take over old nuclear power plants (that have passed the 40-year limit),” the industry insider said. “But such a purchase will not be accepted by the Finance Ministry, which fears the compensation burden. This will leave METI with no choice but to allow such nuclear plants to operate beyond 40 years.”

The power industry made their moves with expectations that the general election would be held before yearend and that the new government would move toward restarting nuclear power plants.

One such indication is found in the power industry’s plans to purchase liquefied natural gas. As long as their nuclear plants remain idle, power companies must import LNG to operate their thermal power plants. But they have relied on short-term purchase contracts. They assume that one nuclear power plant after another will be put back online in a few years, and they worry about oversupply if they import large quantities of LNG.

The moves by the power industry show that it abandoned the DPJ government, which had made every effort to prevent the restart of nuclear power plants. The political liaison of a power company said: “The DPJ-government … has gone too far. We are not giving that party another chance.”

By preventing discussions on power industry reform and working toward an early restart of nuclear power plants, the power industry is getting what it needs to restore much of the power and influence it lost after the Fukushima nuclear disaster.

One thing seems clear: If the new government snarls at and hurts the feelings of the power industry, the ruling parties will suffer the same fate as the DPJ.

This is an abridged translation of an article from the December issue of Sentaku, a monthly magazine covering Japanese political, social and economic scenes.