TEPCO's business plan approved; utility effectively state controlled

[Commentary:  The Japanese better get prepared for a lower standard of living that comes with increased energy costs.  There was little justification to close many of the nuclear plants in Japan outside of fear mongering.]   

The government has approved a special business plan for Tokyo Electric Power Co. that includes an injection of 1 trillion yen in public funds, effectively putting the utility under state control.
With the approval Wednesday, the utility, which runs the crisis-hit Fukushima No. 1 nuclear power plant, will apply to raise electricity rates for households and small-lot users, such as convenience stores, later this week.
Under the current rate, a household that uses 290 kilowatt-hours a month would be charged 6,973 yen. After the hike, that household would see its bill increase by 480 yen, or 6.9 percent.
The utility included the rate hike, together with cost-cutting measures, in its new comprehensive special business plan.
The average rate increase for households is 10.28 percent. Although the basic charge will remain the same, rates will rise incrementally in line with the amount of electricity used. Electricity use up to 120 kwh a month will see a hike of 0.74 yen per kwh. Use between 120 kwh and 300 kwh will see an increase of 2.3 yen per kwh, while that over 300 kwh will increase by 4.89 yen per kwh.
For large-lot users such as factories and offices, whose electricity charges have already increased by an average of 16.7 percent since April, the new plan will see their rate trimmed by 0.31 percentage point to 16.39 percent.
The new business plan, which features a corporate restructuring program, is based on the assumption that TEPCO's Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture will resume operations from fiscal 2013.
The rate hike is supposed to be for three years. With the restart of the plant, the rates would be returned to current levels from fiscal 2015.
However, as the Niigata prefectural government remains wary about giving the restart the go-ahead, there is no clear timeline for the plant to resume operations.
At a press conference after his ministry approved the plan, Economy, Trade and Industry Minister Yukio Edano said: "We can't say anything definite now about whether we can restart the plant. As a matter of course, we may review [TEPCO's plan] later." With regards to the rate hike, Edano said the government will make efforts to trim the increase.
Under the plan, the government will provide public funds of 1 trillion yen through the Nuclear Damage Liability Facilitation Fund to keep TEPCO's finances from deteriorating further. The utility is facing massive compensation payments due to the crisis.
With the latest funds, the total amount of public money provided to TEPCO will total about 3.5 trillion yen.
By providing the funds, the government will gain a majority equity stake and voting rights in TEPCO. Should corporate restructuring efforts not go as well as expected, the government will raise its voting rights to more than two-thirds, gaining the right to decide key corporate policies.
Most of the current board, including Chairman Tsunehisa Katsumata and President Toshio Nishizawa, will step down to take responsibility for the crisis at a shareholders meeting slated for late June.
Kazuhiko Shimokobe, head of the fund's steering committee, will become the new chairman, while Managing Director Naomi Hirose will take over as president.
Also included in the latest business plan are measures to slash costs--through such steps as staff reduction--by more than 3.3 trillion yen over a 10-year-period, and adopting a company-with-committees system to increase transparency.
With the adoption of the system, TEPCO will establish a nominating committee to select directors, an audit committee to monitor directors, and a compensation committee to decide directors' remuneration. These committees will be composed mostly of outside directors.

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