UPDATE2: Gov't orders TEPCO to trim household electricity rate hike.

TOKYO, July 20 Kyodo

(EDS: RECASTING THROUGHOUT)

The Economy, Trade and Industry Ministry ordered Tokyo Electric Power Co. on Friday to revise its application for raising the household electricity rate in line with a government request to trim the rate hike to an average 8.47 percent from the earlier planned 10.28 percent.

"I want your company to make efforts to streamline business (as said by the government)," industry minister Yukio Edano told Tokyo Electric President Naomi Hirose, as cost-cutting efforts by the utility will lead to reduction in the amount of expenses to be passed on to customers in its services area.

Hirose told reporters he hopes to swiftly submit the revised application so other important schedules linked to its fragile financial condition will not be affected, including the redemption of corporate bonds. The rate hike will be implemented from Sept. 1.

Winning government approval to raise power bills is essential for the company to help overcome its tough business condition in the wake of last year's Fukushima Daiichi nuclear power plant disaster. It will also enable TEPCO to receive 1 trillion yen in public funds  and additional loans from financial institutions.

While expressing regret over the planned price hike, Edano said at a press conference in the morning, "We have no other choice but to ask users to bear costs for ensuring stable electricity supply."

He added that the government will continue to urge TEPCO to cut costs and encourage competition among utilities by reforming the nation's electricity industry. "We plan to create a solid scheme that would keep electricity bills down over a medium term," he said.

In May, TEPCO applied to raise household electricity rates by an average 10.28 percent, citing increasing fuel costs for thermal power generation to make up for the suspension of nuclear power generation following the Fukushima accident triggered by the 2011 earthquake and tsunami disaster.

But after screening TEPCO's rate hike plan, the government concluded the company should cut more personnel and other costs to lower the electricity rate.

Utilities in Japan are allowed to pass on to household customers costs to provide power, such as fuel and personnel expenses, and a certain level of "business returns," which are used for such purposes as interest payments.