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New power firms may have to pay some costs for nuke reactor decommissioning

The Economy, Trade and Industry Ministry has begun discussions on a plan to have new smaller electric power companies shoulder part of the costs of decommissioning nuclear reactors, officials said.

This is due to fears that nine major power companies that operate nuclear plants and the Japan Atomic Power Co. alone cannot fully foot the costs of decommissioning their reactors in the future.

The government intends to draw a conclusion on the plan by the end of the year, but the move could spark criticism that nuclear plant operators would be given preferential treatment.

The industry ministry convened the first meeting of an advisory panel on electric power system reform on Sept. 27 to discuss challenges to the liberalization of the power market. At the meeting, the ministry proposed that the costs of decommissioning nuclear reactors be added to power grid usage fees that new power supplies pay to major utilities.

If new power companies add the costs of reactor decommissioning to electricity charges, consumers will be required to shoulder such additional costs.

The industry ministry has worked out the plan, which could be viewed as a relief measure for major utilities, because the business environment surrounding these companies has worsened following the liberalization of the power market and criticism of nuclear power in the wake of the outbreak of the Fukushima nuclear crisis.

The costs of decommissioning a nuclear reactor are about 10 times that for a thermal power generator. The operators of nuclear plants use part of their income from electricity charges to save enough money to dismantle their reactors in the future.

However, if the liberalization of the electricity market progresses, a growing number of consumers could switch to new power suppliers and the prices of electric power could further decline because of intensifying competition, making it more difficult for major utilities to secure enough funds to decommission their nuclear reactors.

The suspension of operations at most atomic power stations is also adversely affecting major power companies.

Power companies could secure enough funds to decommission nuclear reactors if they saved money on the assumption that the rate of utilizing such plants stood at 76 percent and that the lifespan of each reactor was 40 years.

However, the suspension of operations at many nuclear plants has been prolonged and power companies are being forced to decommission some reactors earlier than planned, as a result of which they have been unable to secure enough funds.

Under these circumstances, major power companies are insisting that new power companies should shoulder part of the decommissioning costs.

"Customers of new electric power firms previously used power generated by nuclear plants operated by major utilities. We would like these customers to shoulder a fair share of the costs for reactor decommissioning," an official of one major power company said.

Major power suppliers have asked the executive branch of the government and ruling Liberal Democratic Party (LDP) legislators to consider their requests.

The government has shown consideration to major power companies that are being forced to shoulder the expenses of changes in Japan's energy policy -- such as market liberalization and stepped up safety regulations -- following the outbreak of the Fukushima nuclear crisis in 2011.

A working group within an advisory committee to the industry ministry called on the government in March 2015 to consider a system that would take advantage of the pricing system for power transmission and distribution to help power companies cover decommissioning costs.

However, new power suppliers are opposed to the move. "It'd be unreasonable for new electric power companies that don't have nuclear plants to shoulder the costs of those facilities," said an executive of a Kansai-based new power supplier.

Ennet Corp. President and CEO Tsutomu Takeda told the panel on Sept. 27, "We can't convince our customers unless you (the government and major power companies) explain how much it will cost to decommission a reactor."

An executive of a new power company based in the Tokyo metropolitan area said, "It'd be difficult to gain understanding from our customers who have switched from major power companies following the outbreak of the nuclear disaster."

In response, the industry ministry will consider setting up a market in which power is traded and encouraging major utilities to supply less expensive power generated by nuclear power and coal-fired thermal power plants to the market. The ministry is aiming to allow new power companies to procure less expensive power from the power transaction market in a bid to persuade them to shoulder part of the costs of decommissioning nuclear reactors.

Under the old power supply system in which major utilities enjoyed regional monopolies, power companies were able to secure funds to build and decommission nuclear plants solely by using electricity charges, allowing them to take advantage of low fuel costs for nuclear plants.

With the liberalization of the power market, however, nuclear power plants have lost their edge.

The government has postponed discussions on whether to go ahead with the construction of new nuclear power plants.

The system proposed lately could give preferential treatment to nuclear plants and encourage power companies to build more atomic power stations.

In-depth debate needs to be held on whether nuclear plants will be consistent with the policy of liberalizing the power market.

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