Panel questions Kansai Electric, Kyushi Electric on proposed rate hikes

TOKYO —

A panel of the Natural Resources and Energy Agency on Wednesday questioned executives from Kansai Electric Power Co (KEPCO) and Kyushu Electric Co on their applications to increase electricity rates for both households and corporate users next April.

Both utilities claimed that without nuclear power, they will have to hike rates. KEPCO is seeking a rate increase of 11.88% for household users, which would mean an average 599 yen extra per month, and a hike of 19.23% for large corporate users, Fuji TV reported. Kyushu Electric has applied for an increase of 8.51% for households.

A KEPCO official said the utility had no choice but to apply for a rate increase because all but two of its nuclear reactors are offline. He said fuel costs have surged due to the utility’s switch to geothermal power, and the company faces a shortage in operating revenue.

The Ministry of Economy, Trade and Industry has instructed all utilities to streamline their operations before it will approve rate hikes.

KEPCO said it will implement salary cuts of 16% for all employees and sell off some assets worth 7.5 billion yen. Kyushu Electric said it hopes to raise 14 billion yen by selling various facilities.

Japan Today

  • -1

    basroil

    A panel of the Natural Resources and Energy Agency on Wednesday questioned executives from Kansai Electric Power Co (KEPCO) and Kyushu Electric Co on their applications to increase electricity rates for both households and corporate users next April.

    There's not much questioning to be done. KEPCO and the other companies are spending extra trillions of yen a year in fuel costs alone. Add in lower revenue (less electricity sold), increased debts, and costs to add more capacity, and you'll see that they would actually need close to 25-30% increase just to be marginally profitable. Making these companies sell assets is just a push, by people never elected to power, to force these companies into financial ruin.

  • 1

    zichi

    What should be questioned is how the power companies calculate the power charges. The power companies are paying the highest prices for fuel imports to ensure supplies so that they won't have to reduce power to large user business who pay less for their power than domestic users. They could be paying less for their fuel imports. All contracts from the power companies are not put out to tender to gain the best quotes and pay less. They are allowed to put a profit margin on top of their charges.

    Before power charges are increased, the method for calculating those charges needs a major review.

  • 0

    zichi

    The high power charges are also because of the many decades old monopoly the power companies have over both power generation and power supply.

    Separate the two and the price of power will go down.

  • -2

    basroil

    The fuel costs at the major power companies have tripled since 2010, and they had much more power use then! Check the financial reports and you will see that the fuel costs alone make up the largest burden, and that fuel cost cannot be reduced by magical anti-trust forces, and in fact a larger trust would be able to drive down fuel costs much more than many tiny companies.

  • 1

    zichi

    All the power companies buy higher prices for fuel imports than they need to be paying. Cost of imported fuels is only one factor in calculating the power charges. The power companies pay over the top for everything they use. even the price of toilet paper.

  • -2

    basroil

    Tepco and Kepco spend 54000JPY/kl of crude oil (2012 Fall prices). That is exactly the international futures market value for TOMOC crude oil, and actually CHEAPER than Brent crude!

    Of course, if people actually did the calculations, which are perfectly doable from the financial reports, they can see that the price of fuel has nearly bankrupted all the major companies (which they avoid though offloading assets, but those add more costs at the end of the day, especially now that they will be selling parts of their crude processing, which offset costs because processing is very profitable).

  • -2

    basroil

    Correction TOCOM crude.

    They really need to put an edit system in place.

  • 3

    zichi

    Japan's high power rates stem from lack of competition, legally ensured profitability http://www.japantimes.co.jp/text/nn20110906i1.html

    Reform of the Electricity Supply Industry in Japan http://economics.rice.edu/WorkArea/DownloadAsset.aspx?id=114

  • -4

    basroil

    Japan has lower power rates than many other countries, especially those that like Japan has a bit of coal but not currently using it's full nuclear potential.

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