Power Tariff Increases of More than 30% are Possible if Japan's Reactors Stay Idled

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December 17, 2012--Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--Japan's nuclear plant shutdown following the Fukushima disaster is still playing out in various ways with no final and credible answer to future energy policy, with or without nuclear power, yet available.

The economic impact of the loss of the nuclear power contribution to the national grid was reflected in an announcement that was made by Kyushu Electric Power Company (TOKYO:9503) (TYO:9508) (Fukuoka, Japan) last week. Kyushu will be forced to raise electricity tariff rates for household and corporate uses by 35.64% on average if all of its nuclear reactors remain idled.

The power utility gave the price rise estimate to a meeting of an industry panel that examined its planned average rate hike of 8.51% that is set for next April. The utility serves Kyushu, Japan's island (which is located in the southwest and has a population of about 14 million) and applied for the rate increase on the premise that four of its six reactors will be brought back online.

The company also plans an average rate increase of 14.22% for corporate users. This increase does not require government approval.

Kansai Electric Power Company (TOKYO:9508) is also seeking government approval for an average power increase of 11.88% on the assumption that four reactors will be in operation. The four reactors would include reactors 3 and 4 at its Oi nuclear power plant in Fukui Prefecture. These two were re-started in July and are currently the only active reactors in Japan. The utility serves the Kansai region in the south central Honshu Island, which has a total population of about 23 million. It is understood that the utility would see the need for a rate rise of about 30% if all of its rectors are offline.

The rates now on the table are expected to be approved by the Minister of Economy, Trade and Industry in February or later.

Both utilities reported that their procurement costs for crude oil and coal for thermal power generation in fiscal 2013/15 are expected to be higher than the country's current import prices.

Both companies are considering selling off some non-core assets in an effort to streamline their operations.

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