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Should new power suppliers be made to pay for decommissioning?

October 4, 2016

 

Editorial: Making new power suppliers pay for reactor decommissioning costs unacceptable

 

http://mainichi.jp/english/articles/20161004/p2a/00m/0na/014000c

 

The government is discussing a plan to shift part of the costs for decommissioning nuclear reactors onto new power companies that have forayed into the electricity retail market following its full liberalization this past spring.

The controversial scheme allows major utilities that operate nuclear power plants to pass part of those costs onto new entrants, which will then be tacked onto electricity bills. Such a proposal can only distort fair competition in the liberalized market.

Meanwhile, there is no time to waste in efforts to decommission nuclear reactors in order to achieve the goal of phasing out nuclear power. The government should discuss the cost-sharing issue while drawing a road map toward a nuclear power phase-out. Just easily passing those costs onto new entrants makes no sense.

An expert panel to the Ministry of Economy, Trade and Industry is tasked with discussing the plan to partially shift the decommissioning costs to new power suppliers, and the government is poised to draw a conclusion by the end of the year.

It is estimated to cost around 80 billion yen to dismantle a major reactor. Major power companies have been accumulating funds to that end over a 40-year period, but they will still need to save a total of some 1.2 trillion yen to complete the task.

Major utilities have heretofore amassed those funds by tacking part of the costs onto electricity bills. However, revenues from those channels could dwindle following the liberalization of the electricity market in April, where new entrants are luring consumers with cheaper bills. The plan to shift part of the decommissioning costs onto new entrants was devised to address this financial challenge.

The government insists that consumers who have switched to new power companies should also bear decommissioning costs because they had previously used power generated at major utilities' nuclear plants. However, consumers have already shouldered their fair share of the burden through the electricity bills onto which part of those costs have been tacked. It is unfair for them to have to share yet additional burdens.

It would be understandable if new power companies are made to shoulder part of the decommissioning costs when they purchase power generated by major utilities. The government is apparently trying to fend off criticism by creating a new market where new suppliers can procure power generated at nuclear plants at cheaper prices.

However, there are consumers who are willing to use electricity generated at non-nuclear power plants or by other means. The liberalization of the power market is catering to their needs by allowing them to freely choose which utility to contract. This may also be why the government has instructed power companies to announce their energy source ratio. It would be impossible to gain public understanding if they were to be charged additional costs across the board.

The government has asserted that nuclear power costs less than other power generation methods, including the decommissioning costs. However, the move to shift part of decommissioning costs onto new entrants has raised questions about the legitimacy of that claim.

The government has also begun discussions over the costs for decommissioning the disaster-stricken Fukushima No. 1 Nuclear Power Plant. While Tokyo Electric Power Co. (TEPCO), the operator of the plant, is planning to shoulder 2 trillion yen of the burden, the overall cost is certain to largely top that amount.

There is a proposal to ask new power suppliers operating in TEPCO's service areas to shoulder part of the decommissioning expenses, but it is irrational to pass on the snowballing costs stemming from the nuclear disaster to those new companies. More careful discussions are called for over the matter.

In any case, the issue of how to deal with the colossal amount of decommissioning costs is unavoidable. The government should squarely deliberate whether and how the public should bear the costs after setting forth a clear goal for a phase-out of nuclear power.

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