Subsidies for idled plants will be lowered

August 12, 2015

Grants to local bodies hosting idled nuclear reactors to be lowered

http://mainichi.jp/english/english/newsselect/news/20150811p2a00m0na010000c.html

The Ministry of Economy, Trade and Industry is set to cut back on subsidies to local governments home to idled nuclear reactors in an attempt to pressure them into reactivating the reactors, it has been learned.

Starting in fiscal 2016, the ministry will revise grant amounts based on the operational rate of nuclear plants and other factors. Currently, the grants are allocated to local governments hosting nuclear stations that are suspended for safety reasons by deeming their operational rate to be 81 percent across the board.

Under the planned new criteria, the deemed operational rate will be set for the respective nuclear plants based on their past performances prior to the meltdowns at the Fukushima No. 1 Nuclear Power Plant -- which stood at an average 70 percent. Because the deemed operational rate is applied to nuclear plants nationwide that have remained offline since the onset of the Fukushima crisis, the government's move may prompt local bodies to call for reactivating reactors in their jurisdictions out of fear for reduced subsidies.

According to the industry ministry, the planned measure is aimed at ensuring fairness among local governments home to nuclear power stations after the Aug. 11 reactivation of Kyushu Electric Power Co.'s Sendai Nuclear Power Plant in Kagoshima Prefecture -- so that the amount of subsidies to local governments with restarted reactors will not be less than those to local bodies with idled reactors.

Under the current system, local governments receive grants whose amounts reflect the operational performance of reactors from two fiscal years back -- which will be changed to 1.5 fiscal years back from fiscal 2016. From fiscal 2013 onwards, municipalities have received grants based on the deemed operational rate at 81 percent as many of the reactors they host were suspended for regular inspections by the end of fiscal 2011 in the wake of the Fukushima meltdowns and still remain offline. The uniform 81 percent rate corresponds to the full operational rate except for the regular inspection period once every 13 months.

The ministry started reviewing the grant system after an expert panel to the ministry drew up a report in December last year calling for ensuring fairness among municipalities hosting nuclear plants. The new deemed operational rate will be set at no more than 81 percent and will take into account the operational performance at each nuclear plant prior to the Fukushima meltdowns. Unless reactors are brought back online, grants to each municipality are destined to be cut back.

As many municipalities hosting nuclear stations heavily depend on the grants and other revenues related to nuclear power, they have called on the ministry to maintain the existing deemed operational rate system. The Mihama Municipal Government in Fukui Prefecture -- more than 40 percent of whose revenues in fiscal 2014 were related to nuclear power including the grants for local bodies hosting reactors at 1.49 billion yen -- has already anticipated that the grant amounts will be halved from fiscal 2016 due to the decommissioning of the No. 1 and No. 2 reactors at the Mihama Nuclear Power Plant operated by Kansai Electric Power Co. "If the deemed operational rate is to be brought down on top of this, there will be growing calls for reactivating reactors," said a municipal government official.

Hisao Ito, a special researcher at the Tokyo Jichi Kenkyu Center (Autonomy Tokyo) who is specialized in local government finance, commented, "Under the current scheme where the grant amounts are decided at the discretion of the central government, local governments will not be able to break away from finances dependent on such subsidies. Municipalities should cultivate regional resources other than nuclear power generation, while the central government should support them through impact mitigation measures such as those for former coal mining areas."