Tokyo Electric Power Company (TEPCO) today notified the Minister of
Economy,Trade and Industry of a revision in its rules and rates for the
supply of electricity, including an average 5.21 percent reduction in
electricity rates,effective as of October 1.
The outline of the notice is as follows.
1. Outline of Revision in Electricity Rates
TEPCO will reduce electricity rates by an average of 5.21 percent,
amounting to an annual reduction of ¥173.8 billion, due to a thorough
and overall improvement in management efficiency, as well as to the
expected cost-saving effects of further improvements in efficiency.
The revised unit prices and the percentages are shown in the following
table.
The average reduction rate when compared to current electricity rates is
5.49 percent for lighting (mainly for residential use) and 4.78 percent
for power(mainly for industrial and commercial customers), with the
average reduction rate for both lighting and power at 5.21 percent.
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2. Reasons for the Electricity Rates Revision
TEPCO has exerted efforts towards a thorough improvement in management
efficiency in order to provide satisfaction for its customers thorough
the supply of stable and inexpensive electricity, as well as to
consolidate its business foundations for the long-term future.
In addition to lowering electricity rates for customers, TEPCO has built
upon the effects of improved management efficiency to pay attractive
dividends to its shareholders, bolster its financial standing, and make
capital investments in areas where future growth is expected. Cuts in
electricity rates, and an expansion in electricity rates options
available were carried out as part of these measures in April 2002.
Beginning in April 2004, liberalization in electricity supply has
covered customers using high voltage power service of more than 500kW.
Following the enforcement of the new Electricity Utilities Industry Law,
customers of all high voltage power service categories are set to gain
from liberalization.
As a result, more than 60 percent of the total electric power sold by
TEPCO will be covered by liberalization. Competition is already
intensifying between rival electric utility companies, as well as
between different kinds of energy.
Under such circumstances, TEPCO made preparations for electricity rate
reductions and officially decided to implement reductions effective on
October 1, on the basis of demand and cost trends and other necessary
forecasts.
Specifically, TEPCO will set as the period between the second half of
FY 2004 to the first half of FY 2005 as the period of cost calculation
and cut electricity rates by an average of 5.21 percent based on its
calculations.
As a leading energy service provider, TEPCO is determined to contribute
to the realization of an affluent life and comfortable environment by
offering cheaper electricity and promoting improvements in management
efficiency.
3. Calculation of Costs
(1) Calculation specifications
i.Period of cost calculations
One year, from the second half of FY 2004
to the first half of FY 2005
ii.Investment on plant and equipment
¥538.8 billion from the second half of
FY 2004 to the first half of FY 2005
iii.Fuel expenses
*Exchange rate ¥109 / dollar
*Crude oil price $34.8 / barrel
(Both averages of actual figures for April-June 2004
on the basis of Customs Clearance Statistics)
(2) Total costs
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4. Changes in Electricity Rates by Category
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5. Optional Menus
TEPCO has been offering a variety of options and electricity rate plans
enabling customers to receive discounts to fit their life styles and
power needs. Customers gain increased benefits through these options as
a result of the forthcoming electricity rate reductions.
Following are several popular optional plans recently introduced.
i. Season- and Time-Specific Lighting ("Denka Jozu") -- Introduced in
July 2000
* This plan best fits customers who use overnight thermal storage
equipment(Eco Cute, electric water heater, etc.) and who consume
a relatively high proportion of electric power during mornings,
evenings, and during the night.
* For customers living in all-electric houses, energy charges are
discounted by a further 5 percent (excluding summer daytimes).
- Introduced in October 2000.
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ii. All-Electric Kitchen Home Contract ("Smile Cooking" discount)
- Introduced in June 2002.
*Lighting (residential) customers who make efficient use of electric
power through cooking heaters receive 3 percent discount (excluding
summer period).
iii. Holiday High Load Power Services Plan (Commercial and industrial use)
- Introduced in October 2000
* An option that offers a reduction in electricity rates to commercial
and industrial customers who modify business and operation
activities to increase the proportion of electricity consumed on
Saturdays, Sundays, and holidays.
iv. Commercial Electric Kitchen Power Service Contract -- Introduced in
April 2002
* Customers who use electric kitchen equipment with a total capacity
of more than 30kW for commercial use receive a discount in energy
charges of ¥3 per kWh for their electric kitchen equipment
(excluding peak hours).
v. Commercial All-Electric Power Service Contract -- Introduced in
February 2004
* Customers covered under both the Heat Storage Adjustment and
Electric Kitchen Power Service Contracts for commercial use whose
sole heat source is electric power receive a 7 percent discount
of their energy charges (excluding discounts given in those two
contracts and energy charges during peak hours).
*For a full Optional Contract Menu," please see attached table.
(Reference-3)
6. Electricity rate revisions for the final guaranteed supply covenant
TEPCO, as the power utility company in the region, offers the latest
electricity rate cuts in guaranteed supply deals based on the standard
menu for liberalized categories, even in the exceptional case that a
customer covered by liberalization cannot reach an agreement with any of
the suppliers.(As before, the rate in this category is 20 percent more
than standard menu rates.)
7. Plan for the Improvement of Management Efficiency
To accompany its notice of revisions to electricity rates, TEPCO has
compiled a report on its "Efforts to Improve Management Efficiency"
summarizing the results of measures to improve management efficiency put
in place following the last notice of revisions in electricity rates in
March 2002, and to explain to its customers how TEPCO plans to promote
management efficiency in the future.
In deciding the latest rates reductions, TEPCO has taken into
consideration both the effects of such efficiency improvement efforts
thus far and expected results from the future improvement of its
management efficiency. TEPCO will continue to step up its efforts to
further reduce costs in all aspects of its management.
Overview of Plan to Improve Management Efficiency and future measures
Reduction of Plant and Equipment Investment
TEPCO reduced its plant and equipment investment by some ¥260
billion over the two years spanning FY 2002 and FY 2003, from capital
investment levels targeted in the FY 2002 Management Plan.
It will continue to increase efficiency and flexibility in the
building and operation of its equipment, and will promote restraints
in new plant and equipment investment while maintaining the reliability
of its power supply service.
Cuts in Repair Expenses
Repair and maintenance expenses per unit of electricity sold were cut
by some 15 percent over the two years spanning FY 2002 to FY 2003 from
levels originally planned in the FY 2002 Management Plan (at the time
of the last revision in electricity rates).
TEPCO will continue its efforts to reduce repair and maintenance
expenses while ensuring safe operations and stable supply.
Cuts in Employee Numbers
Further cuts have been made from the target level of employees set in
the FY 2002 Management Plan (at the time of the last revision in
electricity rates). As a result, TEPCO's labor productivity
(electricity sales per employee) has been steadily increasing.
It will further promote its efforts to curb the number of employees by
reviewing its business operations and organization, as well as by
improving the business process by promoting the utilization of
information technology (IT).
Appendix
Main Electricity Rates
The Fuel Cost Adjustment System
Optional Contract Menu Available To Customers
Chronology of revisions in electricity rates
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