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Court injunction a major blow to Kepco's business

 March 10, 2016


Takahama reactor injunction torpedoes Kansai Electric's business strategy



The court-ordered suspension of the No. 3 and 4 reactors at the Takahama Nuclear Power Plant is a major blow to operator Kansai Electric Power Co.'s business, sending the utility's strategy for the April liberalization of Japan's retail electricity market back to square one.

Bringing the generating capacity of the Takahama reactors back online was directly connected to Kansai Electric's plans to lower power prices to boost the company's competitiveness in a wide-open retail electricity market. The March 9 injunction issued by the Otsu District Court, however, has torpedoed that scenario.

Kansai Electric's plan appeared to be progressing smoothly. The Takahama reactors in Takahama, Fukui Prefecture, passed the Nuclear Regulation Authority (NRA)'s strict new safety inspections, and the No. 3 reactor resumed operations in January. Some technical trouble would delay the restart of the No. 4 reactor "for about a month," according to one Kansai Electric executive, but the firm could look forward to the plant once again generating income. As such, the utility was ready to launch a retail power marketing strategy in May that would play up its business stability and reduced household electricity prices.

Now, after the injunction, Kansai Electric will be getting zero power out of the Takahama reactors. At a March 9 news conference at the company's headquarters in Osaka's Kita Ward, atomic fuel cycle section chief Kazuo Kijima told reporters, "We believe this will have an extremely severe impact" on the utility.

Before the Fukushima nuclear crisis, Kansai Electric had been Japan's most atomic power-reliant utility, and thus has been the hardest hit by the eventual shutdown of all the country's reactors in the wake of the March 2011 disaster. Fuel costs for thermal power generation sank Kansai Electric into the red for four straight fiscal years, up to March 2015.

Household electricity rate hikes in 2013 and 2015, plus plunging crude oil prices, will finally get the firm back in the black for the year ending in March 2016, with an expected profit of 150 billion yen. Kansai Electric estimates, however, that the Takahama reactors will cost the company some 300 million yen for every day they remain idle. The expenses won't affect fiscal 2015 results, but "there could be some impact" on profitability for the fiscal year ending March 2017, according to Kansai Electric business planning head Takeshi Tanihara.

The company may lose customers when the retail electricity market opens to competition in April. According to the Organization for Cross-regional Coordination of Transmission Operators, some 73,400 applications to alternate household electricity suppliers had been submitted in Kansai Electric's service area as of Feb. 26.

"There are probably a lot of households that were putting off a decision on switching suppliers until they could get a definite idea of how much Kansai Electric would reduce its prices," an executive at one company set to join the retail electricity market told the Mainichi Shimbun. "If Kansai Electric can't cut rates now, it's certainly possible its customer base will become extremely fluid."

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