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Corporate Information

 
Press Release (May 11,2012)
Regarding Electricity Rate Increase

TEPCO plans to raise electricity rates on July 1, 2012 and has applied to the Minister of Economy, Trade and Industry for authorization to revise the electricity supply provisions connected to the electricity rate increase.

The reasons and the outline of the application for authorization to raise the electricity rates are shown below:

1.Reasons for the application for authorization to raise electricity rates

We sincerely apologize to the communities surrounding the nuclear power station and broader society for the tremendous amount of distress caused by the accident at our nuclear power station.

TEPCO is doing everything it can to address the crucial issues following the occurrence of the accident, including paying out compensation to the afflicted, implementing measures to stabilize Fukushima Daiichi and Daini Nuclear Power Stations, decommissioning Units 1 to 4 at Fukushima Daiichi Nuclear Power Station and securing a stable electricity supply. To ensure electricity supply capacity, we have maximized efforts towards the output increase of thermal power stations, restarted thermal power station operations that had been under suspension for a long time, and implemented the emergency installation of new power sources such as gas turbines in order to cope with the shutdown of Fukushima Daiichi and Daini Nuclear Power Stations, damage to other companies' power stations from whom we have purchased electricity, and the prolonged suspension of operations at Kashiwazaki Kariwa Nuclear Power Station. As a result, fuel costs have risen substantially due to the increased dependence on thermal power generation.

Given this situation, TEPCO has undertaken the thorough streamlining of its operations. In order to further intensify efforts in this area, we have decided to promote more thorough business streamlining in the medium to long-term future to achieve maximum cost reductions based on the "Comprehensive Special Business Plan" authorized by the competent minister.

However, projections show that even the most thorough implementation of business streamlining measures will be insufficient to overcome the serious financial difficulties we are facing while covering the increased cost of fuel and other related expenditures. If present rates are maintained, the operational deficit will continue to worsen. The steep decline in the amount of net assets due to accident expenditures in fiscal 2011 combined with increased fuel costs have led to TEPCO's financial reserves becoming extremely eroded. In addition, given our present ability to raise capital on our own, a further weakened financial base due to the cumulative deficit may cause an enormous impact on business operations including stable electricity supply.

Hence, in order to prevent the occurrence of such contingencies, TEPCO had no choice but to make the tough decision to apply for authorization to raise the minimum range of electricity rates to be effective from July 1, 2012. This raise incorporates increased fuel costs and other related expenditures predicated on thorough streamlining measures.

Given the state of the current economy, we are very aware that an increase in electricity rates will place a tremendous burden on our customers' daily lives and industrial activities. In order to minimize this burden as much as possible, TEPCO is committed to providing full information and clear explanations, offering a variety of rate menu options to help customers save costs as much as possible and predicated on thorough management streamlining, putting forth our best efforts to seek customer understanding.

2.Outline of raising electricity rates

The application was formulated based on the suggestions in the report titled "Council of Advisers Concerning the Review on Electricity Rate System and Operation" (hereinafter referred to as "Council of Advisers") published by the Ministry of Economy, Trade and Industry on March 15, 2012.

According to the report, as the Council of Advisers suggested that the cost finding period should be "three years in principle", "from the perspective to incorporate substantive efforts of the operator," the period is set to three years from fiscal 2012 to 2014 in the application for authorization to raise the electricity rates.

(1)Revised units and rates
The expected total costs from fiscal 2012 to 2014 will be 5,723.1 billion yen due to the inevitable massive increase of mainly fuel costs in spite of the 278.5 billion yen annual average cost reductions achieved from operational streamlining. On the other hand, the assumed revenue in cases where the current rates continue for the cost finding period is 5,046.8 billion yen. In this calculation, a substantial revenue shortage such as an annual average of 676.3 billion yen in the whole company is expected.

In the regulated section among them, the expected annual average revenue shortage is 253.5 billion yen. Despite the regrettable inconveniences to our customers, we would like to request a raise of 2.40 yen/kWh (10.28%) in the regulated section in comparison to present rates.

Average raise rate

Raise in electricity rates in the standard model

(2)Cost of application

1) Preconditions

■Cost accounting period: Three years from fiscal 2012 to 2014

■Fuel cost
·Exchange rate 78.5 yen/dollar
·Crude price 117.1 dollar/barrel
·LNG price 860.5 dollar/ton
·Coal price 145.9 dollar/ton
* The trade statistics price of the latest 3 month (Average from January to March 2012)

■Nuclear power generation rate 18.8%
→The rate is based on the assumed steady operations resumption of Kashiwazaki Kariwa Nuclear Power Station from April 2013 during the three-year cost finding period of the application predicated on receiving acceptance from local residents by ensuring future security and safety. Specifically, it is assumed that the operations of Units 1, 5, 6 and 7 of Kashiwazaki Kariwa Nuclear Power Station will be steadily resumed from fiscal 2013, and Units 3 and 4, from fiscal 2014. (The calculation of the nuclear power generation rate excludes the decommissioned operations of Units 1 to 4 of Fukushima Daiichi Nuclear Power Station)

■Business reward rate 3.0%
→The business reward rate is set to 3.0 %, the same level as the present rate, based on the suggestions of the Council of Advisors and TEPCO's fund raising risks.

2) Total cost

Total cost

3) Measures based on the suggestions of the Council of Advisors
The application for authorization to raise the electricity rates is based on the suggestions of the Council of Advisors, such as the cost finding period set to three years and the amounts of costs that are decided as not appropriate for costs at the time of authorization to raise the electricity rates being excluded.

(3)Thorough business streamlining

Based on the "Comprehensive Special Business Plan," TEPCO is committed to reducing costs of 3,365 billion yen over the next decade, and an annual average of 278.5 billion yen (excluding non-cost items) from fiscal 2012 to 2014.

Thorough business streamlining

See Appendix 1 "Increase of Operations Efficiency" for details of the business streamlining.

3.Setting enhanced rate menus that help reduce customers'burdens

In strongly recognizing the many burdens and inconveniences to customers'daily lives and industrial activities caused by the increase in electricity rates, TEPCO is committed to engaging in thorough business streamlining and will set the following enhanced rate menus to incorporate a framework that helps reduce customer burdens as much as possible.

(1)Rates for general households

The present rates for general households (Meter rate lighting menu) adopt a so-called 3-stage rate system in which unit rate increases are commensurate with usage. In the rate raise, by keeping the increased range of the 1st stage rate which is charged for essential electricity usage in households relatively smaller, the impact on essential electricity usage in lives such as lighting and refrigerators will be reduced, and by further energy saving, the effect of alleviating the charge burden will be increased.

Impact on low usage customers (Example)


(2)New peak controlled rates (Optional Supply Provisions)
As a new rate menu that helps decrease electricity rates, the Peak-Controlled-Season-and-Time-Specific Lighting (hereinafter referred to as "Peak Shift Plan") is set in which higher rates are set for peak hours (13:00-16:00 in the summer) as an energy saving incentive, and lower rates are set during the night time, to help shift electricity use from peak hours to day time/night time or from day time to night time.

New peak controlled rates (Optional Supply Provisions)

As TEPCO submitted the notification of the Peak Shift Plan to the Ministry of Economy, Trade and Industry (effective on June 1) today, customers can subscribe to the Plan from June 1 prior to the start of the electricity rate increase.

See Appendix 2 for the details of the Peak Shift Plan.

(3)Expanded menu for customers signing combination contracts of lighting and power
To offer customers more options for low-tension high-load contracts (Optional Supply Provisions) which are offered to customers who efficiently use electricity for both lighting and power facilities throughout the year, the menu is expanded from the "contracted electricity of 30kW or larger" to "contracted electricity of 15kW or larger."

Expanded menu for customers signing combination contracts of lighting and power)


< Reference > "Major Optional Supply Provisions Menus" list

Reference Major Optional Supply Provisions Menus


4.Measures to win acceptance from customers

TEPCO is committed to providing full information and clear explanations concerning the necessity of the rate raise, implementing business streamlining, providing rate menu options that help alleviate the cost burden as much as possible, as well as address other relevant matters.
Moreover, our homepage will introduce specific, easy-to-understand methods of energy/money saving to alleviate customer cost burdens as much as possible.

(1)Communicating with customers
1)Disseminating information to residential customers
We will carefully deliver information to about 28 million residential customers using various media format such as distributing announcements written on leaflets and the reverse side of the meter slips distributed at the time meter readings are taken as well as posting detailed information on our homepage in a timely fashion.
2)Communicating with various organizations
We will explain the rate raise to each of the about 8,000 organizations (municipal governments, associations for medium and small companies, and consumer groups) that TEPCO built relationships with last summer when visits were paid to request cooperation in saving energy.
The contents of the explanation materials will be tailored for each customer segment such as municipal governments, associations, and households).
3)Communicating during customer visits
Explanations will be provided on those occasions when we meet customers throughout our daily operations such as during customer site visits.
Moreover, we will increase staff numbers at customer hotline centers and create a system for carefully responding to customer concerns and questions.

(2)Introduction of customers' energy/money saving methods
To help alleviate the increased cost burden to customers, "Energy & Money Saving Navi," new contents that provide specific energy/money saving methods, will be posted on our homepage. By introducing various energy/money saving methods by using certain equipment, for example, the contents will help customers examine energy saving that meets their own life styles. Energy/money Saving Plans based on the intended money saving amount that can be continued without any inconvenience are detailed. Moreover, we will introduce more specific energy saving methods to help customers reduce their household energy costs by showing the benefits to be had by replacing home electric appliances.
Customers who wish to know how much their electricity rates will be increased, will be guided to the "Electricity Rates Simulation" on our homepage.

5.Review on the rate raise for customers in the deregulated section

Since last April, we requested and have been raising rates in the deregulated section. When the new application for the raise in electricity rates is authorized by the Ministry of Economy, Trade and Industry, the rate raise for the deregulated section will be reviewed based on the newly authorized cost.
Specifically, the difference from the raised rate in the deregulated section applied from April 2012 will be deducted from the rates after the review.

< Reference > Major rates
The rates include consumer taxes and other related costs. The present rates include fuel cost adjustments based on the trade statistics results from January to March, 2012.

(1)General supply Provisions

Meter-Rate Lighting
Low-Voltage Power Service


(2)Optional Supply Provisions

*The revised rates shown below will be notified to the Ministry of Economy, Trade and Industry after the General Supply Provisions application submitted on May 11, 2012 is authorized.
*If the rates in the applied General Supply Provisions are changed, the revised rates in the Optional Supply Provisions will also be changed.

8-Hour Night Service( Time-Specific Lighting [8-Hour Night Service])

10-Hour Night Service(Time-Specific Lighting [10-Hour Night Service])

Denka Jozu (Season-and-Time-Specific Lighting)

Peak Shift Plan (Peak-Controlled-Season-and-Time-Specific Lighting)

*See Appendix 2 for details of the Peak Shift Plan rates during the time until July 1, 2012 when the newly increased rates take effect.

Smile Cooking Discount (Electric Kitchen Home Contract)

Night-Only Service
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