Tokyo Electric Power Co. (TEPCO) surged electricity rate by 17% as of last April 1 for big industry users. The utility company recently applied the government to permit another hike for ordinary family users as of July by 10.28% on the average. TEPCO smartly conceals causes of the accident at the Fukushima-Daiichi nuclear plant, while tries to impose higher electricity rate, threatening people with alleged power shortage. Electricity rate for household use is regarded as a public fare and a utility must obtain permission from the government. We must stage resistance to prevent the government from allowing TEPCO to increase the charge.
DO NOT APPROVE TEPCO'S DEMAND ON HIGHER CHARGE!
President Nishizawa Toshio, TEPCO, told in the recent press meeting: 'an application for a new electricity rate is our right'. The statement produced embarrassments among users. As for industry users (contracted over 50kw), a liberalized policy is carried out and TEPCO has the right to freely increase the charge. The government is not entitled to interfere.
TEPCO further says arrogantly: 'if a user does not want the heightened rate, he/she can convert a contract to one of other independent electric power companies (PPS=Power Producer and Supplier)'. Competition, however, does not exist as PPSs has only 3.5% share across the country, a very small portion of liberalization.
Household Users Bring 90% of TEPCO's Profit
The electric power charge system applied to household users is often called 'a comprehensive cost-based method'. As for industry users, on the contrary, free competition rules work. Utility companies have gained huge profits, taking advantage of this dual mechanism. TEPCO supplies 38% of the generated electricity to residential users (the regulated segment), which produces 91% of the company's total profit.
The so-called 'basic unit rate' is set by the contract ampere and it remains unchanged, but a unit price expressed by 1kw/h for energy consumed will be increased.
Currently the unit price has three blocks; the first block is up to 120kw/h, the rate will be raised by 7.2% from \17.87 to \19.16, the second, up to 300kw/h above 120kw/h, by 12.5% from \22.86 to \25.71 and beyond 300kw/h, increased by 22.5% from \24.13 to \29.57.
The market for corporation users has been liberalized and new power companies have entered and been active in the competitions. For the ten biggest users within the territory of TEPCO's power supply, the electricity rate is as low as \11.80 per 1kw/h, which is less than a half of the price for ordinary family use, \23.34 on the average.
The major reason that the utility can retain the higher price for family uses lies in a fact that they are protected by the official, comprehensive cost-based mechanism. The method is applied broadly to small users and the unit price is set by the costs of fuel, payroll and etc. added by a certain profit.
The second reason is the family-use segment is not liberalized, in which power companies can monopolize markets to sell. Individual users are disadvantageous as they cannot choose a supplier, compelled to buy electricity with the price that power firms fix.
Another aspect to focus on is the fuel cost adjustment scheme. The Japan's electric industry imports liquefied natural gas (LNG) for thermal generation with the world-highest price and reflects the cost in the charge when the import price rises. Trading companies gain the history-biggest profits through commissions.
Victims of Electricity Business
The country's energy capital has a stock of uranium fuel, which is expensive, for a use of three years ahead. Furthermore, it will hike the charge by adding the cost of fuel imported after the earthquake and accident as an emergency step. Household users are victimized by the behaviors of electricity companies; the comprehensive cost-based charging system is a mechanism supported by the conservative parties and governments which have collaborated with the demands of power industry.
The Noda government has decided to restart operation at a nuclear power station in the western region of Japan before it has not yet made a thorough review of the accident at Fukushima. What will come next, if this government cordially approves the TEPCO's demand?
June 19, 2012