Japan to change power pricing to aid households

Tokyo Japan's government plans to change the country's electricity pricing system as early as this month to restrict the type of business costs that regional utilities can pass on to household power bills. The power utilities, which typically hold regional monopolies and may raise power rates, will be prevented from passing on endowments and some advertising expenses, a government panel said in a report yesterday. Bills will continue to reflect costs of personnel, maintenance and fuel. The report didn't give an estimate for how much household power prices will be lowered by the new regulations, though Hirofumi Kawachi, an energy analyst at Tokyo-based Mizuho Investors Securities Co, said the changes are cosmetic and won't reduce rates. "Utilities will need to raise power tariffs sooner or later unless the government allows a restart of a nuclear reactor," he said. Scrutiny of the utilities billing practices follows a government investigation of Tokyo Electric Power Co in September following the Fukushima nuclear disaster. The investigation report said the company overestimated costs used to calculate electricity prices for as many as ten years. Safety checks The utilities had 10.7 trillion yen (Dh466.4 billion) of loans outstanding at the end of December, the highest in more than nine years. That's the result of the Fukushima disaster, which forced the power producers to switch on oil and gas plants and pay higher fuel bills as most of the country's nuclear reactors have been shut for safety checks. Utilities that heavily rely on nuclear power, such as Kansai Electric Power Co, may need to raise electricity prices for households at least by about ten per cent to return to a profit, Kawachi said. The changes will come into effect by the end of March, Hideharu Sakata, deputy director of electricity markets at the Ministry of Economy, Trade and Industry, said yesterday. The ministry, which overseas the power industry, hasn't estimated how much the new pricing system would help reduce power rates, Sakata said. "As utilities with a regional monopoly don't face a competition risk, the average personnel cost of general companies should be used as a benchmark to decide that of electricity companies," the report said. The average annual income of Japan's electricity companies is 6.8 million yen per employee while that of companies with more than 1,000 employees is 5.4 million yen, according to the report. The utility known as Tepco plans to raise electricity rates for corporate customers by an average of 17 per cent, it said in January. Tepco is considering increasing power prices for households in the latter half of the year, three people with direct knowledge of the matter said in February.