Don’t bank on nuclear restarts

Power companies are moving again to raise their electricity rates to get out of dire financial straits caused by the increased cost of importing fuel to run more thermal power plants while their nuclear power reactors remain idled. Hokkaido Electric Power Co. is the first among the nation’s regional utilities to apply for government approval of a plan to raise its rates for the second time since the shutdown of nuclear power plants following the March 2011 triple meltdowns at Tokyo Electric Power Co.’s Fukushima No. 1 plant.

Other utilities including Kansai Electric Power Co. and Tepco may follow suit in the coming months.

Electricity charges are estimated to have already increased by roughly 20 percent for households and nearly 30 percent for businesses compared with 2010 levels.

Additional hikes could weigh heavily on households and businesses alike, and for that reason many are calling for a quick restart of the idled nuclear reactors — to remove an obstacle to Japan’s economic growth. That, however, does not warrant a return to business as usual for nuclear power in Japan.

While minimizing the inevitable rate hikes by introducing more streamlining and efficiency in their operations, the utility firms should begin an effort to change their cost structure and reduce their reliance on nuclear power by taking a more realistic view of the situation since the Fukushima disaster.

The Abe administration also needs to set down more specific goals in Japan’s energy policy that will incorporate efforts to reduce “as much as possible” the nation’s dependence on nuclear power — as it says in the government’s latest basic energy plan — to set a clear direction for the utility industry.

Hokkaido Electric applied to the Ministry of Economy, Trade and Industry in late July for a bid to raise household rates by an average of 17 percent. It also plans to hike rates for corporate users by 22.6 percent, which does not require the government’s nod. These plans come on the heels of a 7.7 percent and 11 percent hike in household and business rates, respectively, introduced just last September. The latest hikes could take effect in November at the earliest.

Since 2011, seven power companies have introduced hefty rate hikes to reflect rising imported fuel costs. The government estimates that Japan’s reliance on fossil fuels for its electricity generation hit 88 percent in 2013, topping the 80 percent at the time of the first oil crisis in 1973.

With import costs also driven up by the yen’s fall since 2012, fuel imports amounted to ¥27 trillion in 2013, ¥10 trillion higher than in 2010 according to the government’s white paper on energy.

Six power firms reported losses for the business year to March, with Hokkaido Electric’s consolidated pretax loss hitting ¥95.3 billion — its third straight year of being in the red. When it raised its rates 11 months ago, Hokkaido Electric assumed that its Tomari Nuclear Power Plant would resume operations by June this year.

When Kansai Electric raised its electricity charges in the spring of 2013, it similarly calculated that its Oi and Takahama nuclear plants in Fukui Prefecture would be up and running.

In its reconstruction plans approved by the government last December, Tepco also assumed that it would start reactivating reactors at its Kashiwazaki-Kariwa Nuclear Power Plant in Niigata Prefecture by July this year — adding that it might need to raise its rates again by up to 10 percent if the restart of the plant was delayed.

All of these forecasts by utilities have proven too optimistic. Of the 20 reactors at 13 nuclear power plants under safety review by the Nuclear Regulation Authority since July last year, the two reactors at Kyushu Electric Power Co.’s Sendai plant in Kagoshima Prefecture have effectively cleared the NRA screening, but their actual restart is not likely before the end of this year due to pending procedures.

It is not known how soon the NRA screening — based on tightened standards for plant resistance to natural disasters and severe accidents, and on more rigorous checks of on-site earthquake risks — will proceed.

In rushing to get the NRA’s nod to restart their reactors, the power companies appear oblivious to citizens’ strong safety concerns over nuclear power since the Tepco plant disaster disrupted the lives of tens of thousands of Fukushima residents. More than three years afterward, opinion surveys still show that many people remain concerned about the restart of idled nuclear power plants.

The entire process for restarting the nuclear plants, including the necessary approvals from host municipalities and prefectures, is going to be tough and will take a long time. At present, only 20 of the nation’s 48 reactors are under NRA review.

There will be limitations on what the power companies can do in their efforts to further trim costs and streamline operations, such as more fuel-efficient power generation.

Additional hikes in electricity charges may be unavoidable to some extent. But as long as the power companies keep drawing up business plans based on the hope of once again being be able to operate nuclear power plants as they did before 2011, consumers and businesses can bet on the certainty of more hikes in the future.

  • Starviking

    The last paragraph seems to be saying that rate hikes are inevitable if utilities continue to push for restarts, but what rate hikes would occur if the subtext of this piece is pushed through, i.e. the abandonment of restarts? NPP write-offs, guaranteed need to import large amounts of fuel oil into the future, and of course, massive renewables investments needed rapidly.

    I think logically, the latter would result in much higher rates for consumers and businesses. How this piece could come out with a near diametrically opposed message is perhaps reflective of sloppy thinking.