Tepco faces revolt over price rise Tokyo Electric Power is facing a revolt by corporate customers after the utility said it would sharply increase the price of electricity, highlighting the difficult choice Japan faces between accepting higher energy costs or restarting nuclear plants that were shut after the Fukushima accident last year. Tepco, which has a near-monopoly on electricity sales in Tokyo and the surrounding area, is seeking an average 17 per cent rate increase for large users in contracts that were due to be renewed from April 1. But so far fewer than one in five customers have agreed to the rise. "The basis for the rate hike is not clear, so why are they doing this?" says Hiroshi Ito, secretary-general of the Kawaguchi Chamber of Commerce, which represents 7,600 companies in Kawaguchi city, a suburb of Tokyo. We believe it is an abuse of Tepco's dominant power. Mr Ito's organisation is asking Japan's Fair Trade Commission to intervene on the grounds that the price increase violates anti-monopoly law. Tepco says raising prices is crucial to covering an estimated Y686.5bn ($8.3bn) increase in its generating costs this year. It has had to buy more natural gas and other fossil fuels to compensate for the loss of its 17 nuclear reactors, including four destroyed at Fukushima Daiichi. Nuclear plants previously accounted for 40 per cent of its electricity. The pricing stand-off has been intensified by public anger over the Fukushima disaster, and underscores the challenges Japan faces over its electricity policy. The last of the country's 54 nuclear reactors is scheduled to be shut down for safety inspections next month, but politicians and regulators have yet to formulate clear criteria for allowing them to restart. If the plants remain offline, the resulting rise in energy costs could have long-term implications for the Japanese economy, as businesses contemplate the costs of keeping operations in Japan. Electricity rates are already twice those in the US and triple those in South Korea, according to Takahide Kiuchi, chief Japan economist at Nomura Securities. Yukio Edano, the economy minister, has warned Tepco not to cut off electricity to those who have refused to pay the higher rate, something the company could technically do after 51 days. But Tepco, which has already cautioned that late payment will trigger a 10 per cent interest charge, says it will have to act eventually. We will explain the situation carefully to all our users. But if there are users who think they will be able to use their electricity forever [without paying the higher rate] it will be a problem, so we have to make a decision at some point," it says. Other utilities could soon follow Tepco in seeking to charge more for power. Residential rates are regulated by the government, but utilities have been free to raise prices for larger customers - including hospitals and government agencies, as well as factories and office buildings - since a partial deregulation of the electricity sector in 2000. Takao Nakagaki, a professor at Waseda University, says greater competition is crucial to keeping prices down, but that this will require a fundamental rethink of energy policy. Transmission lines are controlled by Tepco and nine other regional utilities, which charge independent power suppliers high fees to carry their electricity, discouraging new entrants to the sector and leaving customers with few options. Customers are angry that Tepco, which last week requested a Y1tn capital injection from the government, is passing on the bulk of the anticipated 20 per cent increase in its generating costs, and argue that the utility needs to cut costs before raising rates. The company had hoped to increase revenues by Y400bn this year as result of the price increase. Mitsuo Okada, secretary-general of the Kawaguchi Cast Iron Foundries Association, which represents 135 companies, says Tepco's "high-handed" price rise would wipe out profits at some smaller businesses. "Tepco's own mistakes are a major cause of the situation, so to demand a rate hike just like that is unacceptable," he says.