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January 27, 2015

Kansai Electric aims to cut retirement benefits, in bid to raise prices again

http://www.japantimes.co.jp/news/2015/01/27/business/corporate-business/kansai-electric-aims-cut-retirement-benefits-bid-raise-prices/#.VMifFS51Cot

JIJI

OSAKA – Kansai Electric Power Co. has asked its labor union to accept cuts in retirement allowances as the firm tries to repair its balance sheet, according to informed sources.

The utility also asked Monday for the union to agree to a suspension in housing allowances from fiscal 2015.

The company hopes the cost-cutting moves will help it secure government approval for another hike in domestic power prices, the sources said.

Reduced retirement benefits would affect around 18,000 rank-and-file employees. After reaching an agreement with the union, the company plans to apply the cuts also to some 2,700 employees in managerial posts, the sources said.

Specifically, the company plans to review its retirement benefits system from fiscal 2015 by raising the proportion of defined-contribution pension funds that are managed by employees, the sources said. The employees would get lower retirement allowances if investments underperform.

In May 2013, Kansai Electric raised its electricity rates for households by 9.75 percent on average. In exchange for the hike, the company conducted a 60 percent cut in executive pay, reduced monthly salaries of employees by 5 percent and skipped their bonuses.

The company’s earnings deteriorated further last year as the nation’s fleet of commercial nuclear plants remained idle, which forced it to incur imported fossil fuel costs. In December, it applied for government approval for another full-scale household electricity rate hike of 10.23 percent.

Kansai Electric has already imposed another 5 percent cut in executive pay, but it faces pressure to cut costs further.

Hokkaido Electric Power Co., which faces a similar situation, hiked its household electricity rates again last November, becoming the first power supplier to conduct a second full-scale hike since the 2011 triple meltdown at Tepco’s Fukushima No. 1 plant.