President Higuchi announces application to raise electricity rates for households.

November 24, 2022
On November 24, Tohoku Electric Power applied to the government for a 32.94% average increase in regulated electricity rates for households. This is the first time since February 2013 that the company has applied for a price increase to revise basic rates and electricity unit prices. The increase is the third largest in history. The free electricity rates for households, which do not require government approval, will also be raised by an average of 7.69%, both of which are scheduled to go into effect on April 1 next year. This is the first time that a major electric power company has applied for a price hike due to soaring fuel costs caused by Russia’s invasion of Ukraine and other factors.

At a press conference held in Sendai City on April 24, President Kojiro Higuchi said, “The current electricity revenues will not be sufficient to cover fixed costs, and if this situation continues, we will not be able to procure fuel stably or invest sufficiently in power facilities. We are deeply sorry that we are applying for a large price increase, but we hope you will understand.

 The regulated rates will increase both the basic rate and the unit price of electricity. The amount of electricity used is divided into three levels, and the more electricity is used, the larger the increase. In the case of the model case (contract type: “metered electric light B,” contract current: 30 amperes, electricity consumption: 260 kWh), the monthly fee will increase by 2,717 yen to 11,282 yen.

 The total cost of fuel, labor, and other costs calculated for the application averaged 2.1636 trillion yen over the 23-25 year period, an increase of 1.4 times the 1.5067 trillion yen from 13-15, the basis for the current rate setting. Rising fuel costs and the cost of procuring electricity through markets and other means account for most of this increase.

 The restart of Onagawa Nuclear Power Plant Unit 2 (Onagawa Town, Miyagi Prefecture, and Ishinomaki City), scheduled for February 2012, was also factored into the cost calculation. The plant will be able to reduce the amount of fuel it buys, which will lead to an annual cost reduction of about 100 billion yen, and Higuchi said that the price increase will be curbed by about 5%.

 In order to compress the price increase, the plan also included 115.9 billion yen in management efficiency improvements. In addition to the initiatives already undertaken, such as more efficient fuel procurement, the company will reduce the number of employees by curtailing new hiring and extend the periodic inspection cycle of thermal power plants.

 The METI’s expert panel will review the application. In Tohoku Electric’s previous application, the actual price increase was reduced after discussions on whether the calculation of the total cost was appropriate.

 The average increase in free rates for households is smaller than the regulated rates because the system was changed in December to reflect fuel price fluctuations without a cap, based on the fuel cost adjustment system.
President Higuchi’s Painful Decision to Ensure a Stable Supply

 The following is a question-and-answer session with Tohoku Electric Power President Kojiro Higuchi, who announced the application for an increase in electricity rates for households.

 -The increase will place a heavy burden on households.

 With not only electricity rates but also prices rising, it is distressing to see the increase. I hope you understand that this is a difficult decision to make in order to ensure a stable supply of electricity.

 -How do you plan to improve management efficiency?

 We will reduce repair costs by extending the inspection cycle for thermal power plants and reduce fuel costs by reducing spot procurement as much as possible. In terms of personnel reduction, we will consider consolidating our sales offices.

 We have already reduced executive compensation by up to 20% linked to performance and voluntarily returned up to 10% of corporate rates.

 -Other major electric power companies are also planning to apply for price increases.

 The biggest difference between us and other companies is the two earthquakes that occurred off the coast of Fukushima Prefecture last year and this year. (The biggest difference between us and other companies is the two earthquakes off the coast of Fukushima Prefecture last year and this year, which knocked out power (from several thermal power plants) and increased the cost of restoration.

 -The deregulation of the electric power industry was supposed to lower electricity prices through competition.

 However, the unexpected rise in fuel costs, such as this one, cannot be absorbed through friendly competition among power providers. Tohoku Electric is expensive, but new power companies are not cheap, and we believe that we are now in a state of emergency.