TEPCO to reduce charges for PPS

June 12, 2012

TEPCO sets cut in charge for line access

http://www.yomiuri.co.jp/dy/national/T120612005301.htm 

The Yomiuri Shimbun

Tokyo Electric Power Co. will lower charges for power producers and suppliers (PPS) to use its electricity transmission lines by about 10 percent, sources said Tuesday.

This will be the first reduction of such charges in four years.

TEPCO, which has been forced to streamline its management, decided on the cuts after reviewing costs for construction and maintenance of its power line network, the sources explained.

The reduction will make it easier for independent small power suppliers to sell their own electricity to major clients such as factories and companies. Therefore, the rate cut is expected to revitalize the power market.

The PPS firms, such as major urban gas firms and oil wholesalers, have been selling electricity generated by their own thermal and other kinds of power sources to factories and office buildings.

However, the access charges for transmission networks usually comprises about 20 percent of their electricity charges for major clients. This cost burden has been a major obstacle for new companies that want to enter the business.

Within TEPCO's service area, PPS companies provide only 6 percent of all electricity sold.

TEPCO reviewed the basic factors for calculating electricity charges when it applied to the government for permission to raise electricity charges for households beginning this summer.

The review showed costs for construction and maintenance of transmission lines for its network will decrease, the sources said.

TEPCO will apply the reduction in access charges retroactively to April, they said.

If more companies and factories conclude the PPS firms' charges are attractive after the new access rate is implemented, the total power supply will also increase and may make up for the expected power supply shortage this summer, the sources said.

Beginning in April, TEPCO raised power charges for major clients such as factories and companies about 16 percent on average.

In the past, many corporations and local governments that wanted to conclude contracts with PPS companies with less expensive charges had to give up due to the scarcity of new companies joining the market.

If more new suppliers enter the business, clients will be able to choose from cheaper suppliers.

TEPCO has repeatedly cut its transmission access charges after implementing its own cost-reduction measures.

For clients such as large factories with contracts for 2,000 kilowatts of power, the average charge was 3.32 yen per kilowatt-hour as of March 2000, when the electricity retailing business was liberalized.

TEPCO subsequently applied to the then International Trade and Industry Ministry for five more cuts. As of September 2008, it was cut to 2.25 yen, about two-thirds of the initial charge.