Japan Consumer Electricity Costs Expected to Rise

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Researched by Industrial Info Resources East Asia (Kofu-shi, Japan)--Earlier in the year and prior to the Great East Japan Earthquake on March 11, Tokyo Electric Power Company Incorporated (TYO:9501) (TEPCO) (Tokyo, Japan) announced the readjustment of its fuel consumption outlooks. At that time, TEPCO announced the cut of at least 8 million barrels from crude oil consumption estimates and the rise in liquefied natural gas (LNG) consumption. The crude oil cuts were primarily due to economics and the restart of a unit at Kashiwazaki-Kariwa nuclear power station.

Despite a forecast cut in crude oil consumption this year, many utility companies, including TEPCO, consumed more oil during the summer and fall of 2010. A rise in the price of crude coupled with the demand for more electricity last year prompted TEPCO to raise electricity costs, which were supposed to come into effect in March of this year. Typical monthly consumer electric costs were expected to climb by 17%.

Following the Great East Japan Earthquake Disaster and power crisis, Japan's LNG imports are expected to climb. Japan is the largest importer of LNG in the world, and imported 70 million tons last year. Prior to the power crisis, LNG-fired power and nuclear-derived power comprised nearly even shares of Japan's installed generation capacity, however this year, LNG imports could increase by as much as 50% as smaller gas-fired generators come online to compensate for lost electrical capacity.

TEPCO, Japan's largest utility, as well as Tohoku Electric Power Company Incorporated (TYO:9506 ) (Tokuden) (Sendai, Japan), which was hit hardest by March 11's earthquake; and Chubu Electric Power Company Incorporated (TYO:9502) (Chuden) (Nagoya, Japan) are expected to make up the bulk of additional imports. Chuden recently agreed to comply with a government order to suspend operations at its Hamaoka nuclear power station in Shizuoka prefecture due to the high possibility of the Tokai earthquake. For more information on Chuden's decision, read the March 10 article - Chubu Electric Complies with Prime Minister's Nuclear Shutdown Order.

TEPCO is now also responsible for providing monetary compensation to those displaced or affected by the nuclear crisis created by Fukushima Daiichi and Fukushima Daini. Monetary compensation, to be shared with other utility companies who own and operate nuclear reactors throughout Japan, along with the use of more expensive energy sources, is expected to raise consumer electricity costs further. This trend is expected to reverberate throughout other utilities involved in aiding TEPCO in compensation.

On the bright side, utility companies and the government are urging consumers to conserve electricity. During the summer, which is expected to be as hot as last year's, customers in the TEPCO and Tokuden service areas are being advised to use standing fans instead of air conditioners in order to help avoid the implementation of rolling blackouts.

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