Tokyo Electric Power Co. plans to cut costs by 2.6488 trillion yen ($34.1 billion) over the next 10 years, up 100 billion yen from the previous target, under its "emergency special business plan."
Tokyo Electric Power Co. plans to cut costs by 2.6488 trillion yen ($34.1 billion) over the next 10 years, up 100 billion yen from the previous target, under its "emergency special business plan."
The target was revealed in the "action plan for the promotion of reforms," or for the streamlining of TEPCO's operations, released by the utility and the government's Nuclear Damage Liability Facilitation Fund (NDF) on Dec. 9.
It details how TEPCO will carry out the emergency special business plan that the company and the NDF drew up in November. That plan was needed for TEPCO to receive government assistance to pay compensation to victims of the accident at the company's Fukushima No. 1 nuclear power plant.
The planned cost reduction includes 511.8 billion yen from streamlined material procurement, 640.5 billion yen from wage and bonus reductions, and 324.4 billion yen from personnel cuts.
The company will also abandon its principle of owning all of its power generation facilities. TEPCO, facing difficulties in procuring funds for investment in plant and equipment, will instead consider buying power from other suppliers.
TEPCO will draw up a plant and equipment investment plan by the end of January. By March, the utility will compile a policy on selling thermal power plants and other assets after clarifying legal and other issues.
Reforms are also envisaged for power demand. TEPCO will begin introducing smart meters, which contain telecommunications functions that allow for close monitoring of electricity use, to individual households in fiscal 2013.
Next spring, TEPCO and the NDF will submit to the government a "comprehensive special business plan" on TEPCO's future management and file another request for assistance.
Although the action plan is ready, important issues that could affect consumers, including electricity fee hikes and a "virtual nationalization" of TEPCO, have yet to be discussed in earnest.
TEPCO expects to post a consolidated net loss of 600 billion yen for the fiscal year that ends in March 2012.
In an interview with The Asahi Shimbun, TEPCO President Toshio Nishizawa suggested that it would be necessary to raise electricity rates.
"The suspended nuclear reactors have led to increased fuel costs (for thermal power generation). We are running current deficits," he said.
All reactors are expected to be offline by next spring at the Kashiwazaki-Kariwa nuclear plant in Niigata Prefecture, TEPCO's only nuclear plant currently in operation. It is unclear if or when they will be restarted.
But the prospect of a rate hike remains in limbo. Expecting TEPCO to apply for a rate hike, the industry ministry in November set up an internal study group to review the electricity rate system.
Yukio Edano, the industry minister who is responsible for approving any rate hikes, is taking a tough stance against TEPCO.
"I want (TEPCO) to do its utmost to avoid a rate hike," Edano said.
TEPCO risks falling into a state of excess liabilities if it fails to raise rates and is forced to pay huge amounts to decommission the Fukushima No. 1 nuclear plant.
At TEPCO's request, the government can inject capital via the the NDF to keep the company afloat. But that would mean a virtual nationalization of TEPCO, which the company wants to avoid.
"I have all options in my mind," Edano told a news conference on Dec. 9.
The government and TEPCO may wage a tug of war over the government's capital injection through next spring.
(This article was written by Tetsuo Kogure and Toru Nakagawa.)