Panel urges TEPCO to trim 10.28% household electricity rate hike plan.

TOKYO, July 5 Kyodo

An industry ministry panel decided Thursday to propose that Tokyo Electric Power Co. reduce some of the costs it plans to pass on to customers by raising electricity rates, suggesting that the utility's planned 10.28 percent rate hike for households will be lowered.

The panel did not include in its report compiled the same day a specific rate hike percentage it would recommend to the utility known as TEPCO, which is struggling to overcome tough business conditions in the wake of the Fukushima Daiichi nuclear power plant disaster last year.

But sources have said that the rate hike could be below 10 percent as the report calls for the need to cut expenses earmarked for repairing power generation facilities and to review the rate of what is known as "business return," which is similar to profit for ordinary companies and which the utility uses for interest payments and dividends.

Based on the proposal, the utility is expected to reapply for a revised percentage rate hike to Economy, Trade and Industry Minister Yukio Edano, whose permission is required, hoping to realize the raise on Aug. 1.

TEPCO initially applied to Edano on May 11 to raise household electricity rates by an average 10.28 percent, based on an estimate that total costs will average 5.72 trillion yen per year during the three years from fiscal 2012.

Utilities in Japan are allowed to pass on to household customers costs needed to provide power, such as fuel and personnel expenses, and a certain level of business return.

The panel said in the report that it screened the costs in line with the basic idea that it will not allow the utility to pass on such expenses as advertisements for purposes other than public interest and donations it has given out to various entities.

As for personnel expenses, the panel acknowledged that the utility's calculation is reasonable, but noted that there are "strong calls to further reduce the wage level" as the company will receive an injection of public funds and effectively be placed under state control.

The panel also accepted the need to pass on expenses to maintain the stable condition of the crippled Nos. 1 to 4 units at the Fukushima Daiichi plant, as well as costs to outsource some clerical work to deal with accident-related compensation claims, such as receiving written requests or taking calls.

TEPCO has vowed to cut more than 3.37 trillion yen in costs during the 10 years from fiscal 2012, which began in April, but it has said it still needs to resort to a rate hike amid the increasing fuel costs for thermal power generation to make up for the halt of nuclear power generation following last year's Fukushima accident.

The increase in electricity bills is one of the key measures that TEPCO sees will help it turn its business around, together with a 1 trillion yen injection of public funds.