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Pass on the cost of decommissioning

November 27, 2014

Gov't eyes system for power firms to tack reactor decommissioning costs to power bills


The Ministry of Economy, Trade and Industry has started to consider introducing a system in which major power companies can tack costs of decommissioning their nuclear reactors onto power bills for consumers even after the full liberalization of electricity retailing fees scheduled for 2018 to 2020, it has been learned.

An idea has emerged that major power companies pass the costs of decommissioning their nuclear reactors onto the usage fees for those companies that are to transmit and distribute electricity produced by the utilities to households and business establishments after the power generation business is separated from power transmission and distribution operations. The industry ministry intends to pave the way for the major utilities to decommission their nuclear reactors early by letting them recover decommissioning expenses without being affected by price competition that is expected to emerge after the deregulation of the electric power industry.

The major power companies that have nuclear plants have been posting the costs of decommissioning their reactors every fiscal year in installments and tacking the costs onto power bills. In July 2013, the government decided to limit the life of nuclear reactors to 40 years in principle. Thus, the power companies, which had planned to operate their reactors beyond 40 years, are forced to decommission their ageing reactors earlier than planned and move up the schedule for posting the decommissioning costs. Under such circumstances, the power companies could incur huge losses.

The industry ministry estimates that if seven reactors are decommissioned in July 2016 after 40 years in operation, there will be a loss of about 21 billion yen for each reactor. Those power companies, whose finances are deteriorating due to a delay in restarting their reactors, are cautious about posting huge losses, raising concerns that the decommissioning of reactors might not go smoothly. For this reason, the ministry plans to allow the power companies to post costs of nuclear facilities, including decommissioning expenses, in installments over multiple business years so as to prevent their finances from deteriorating quickly.

The ministry is rushing to consider a new system because electricity fees will be fully liberalized around 2018 to 2020 and the current rate system in which power companies are allowed to tack decommissioning costs onto utility bills will be scrapped accordingly. If decommissioning costs are to be tacked onto power bills only from major utility companies after the full liberalization of the electricity retailing market in 2016, emerging start-up electricity retail companies will have advantages in setting electricity fees. If that is the case, the major power companies will lose their customers, making it difficult for them to recover decommissioning costs. The industry ministry will help the major power companies to decommission their reactors as originally planned by resolving such concerns.

November 27, 2014(Mainichi Japan)

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