Electric Utility Deregulation and the Need
for Nuclear Fuel Recycling
ON FEBRUARY 18, 2003, the Electric Industry Committee, an advisory
committee to the Minister of Economy, Trade and Industry, issued
a report that includes a model for the deregulation of Japan's
electric utilities. Based on the report, a bill to amend the Electricity
Utility Industry Law was submitted to the Diet on March 7.
When the bill becomes law, all high voltage users whose demand
is over 50 kilowatts will have the option of selecting their electricity
suppliers from April 2005. In addition, a new Power Exchange will
also be established. As a result, 63 percent of Japan's total
power demand will be liberalized. Moreover, complete liberalization
is scheduled for consideration beginning in April 2007. The bill
also stipulates that the ten existing electric utilities will
handle the overall operations of generation, transmission, and
distribution of electric power to retain the advantages of the
present power supply system, while transparent and impartial operation
of transmission and distribution must be guaranteed by a neutral
organization as a rule maker and supervisor.
According to the bill, it is necessary to consider appropriate
systems and measures to achieve smooth implementation of nuclear
power generation and back-end cycle business operations, as well
as to promote a functioning investment environment. The bill states
that the question of specific systems and measures, such as economic
ones, should be considered by the end of 2004. These considerations
also include determining the proper roles for the government and
the private sector, as well as dealing with issues of coordination
with the existing system.
Japanese utilities believe that it is important to consider these
issues soon because the promotion of deregulation increases the
risk of uncertainty for very long-term business operations, such
as cost recovery and demand prospects. Balancing the key public
concern of long-term energy security with deregulation and competition
is vital.
Energy security is an extremely important issue for resource-poor
Japan, which is dependent on imports for about 80 percent of the
primary energy supply. Nearly 90 percent of total crude oil supplies
come from the Middle East. Nuclear power makes a great contribution
to energy security by producing the equivalent of approximately
465 million barrels of oil per year, which corresponds to about
30 percent of annual crude oil imports. Further energy security
will be supported by the domestic nuclear fuel cycle in which
unburned uranium and plutonium are recovered through spent fuel
reprocessing to conserve uranium resources. In addition, nuclear
power generation does not emit carbon dioxide (CO2),
and thus helps to cope with growing concern about global warming.
So far, nuclear power generation has had the net effect of reducing
Japan's total CO2 emissions by 20 percent.
The Japanese government has thus implemented policies to establish
a closed nuclear fuel cycle. Based on these policies, Japan's
electric utilities are promoting a nuclear fuel recycling program.
Japanese utilities keenly appreciate the need for nuclear power
generation and establishing a closed nuclear fuel cycle. For Japan's
long-term energy security, Japanese utilities believe that it
is crucial to establish nuclear fuel recycling, including reprocessing,
at the same time that competition intensifies and deregulation
progresses. For this reason, we are preparing for the commencement
of commercial operation of the Rokkasho Reprocessing Plant of
Japan Nuclear Fuel Limited (JNFL) in July 2005, as scheduled.
As a community-based entity, it is vital that the electric power
industry rebuild the public trust undermined by the industry's
inappropriate handling of voluntary inspection records at nuclear
power plants. The Tokyo Electric Power Company (TEPCO) is making
efforts to gain the understanding of residents in the vicinity
of nuclear power plants. TEPCO plans to suspend operations at
all its nuclear power units to conduct inspections to ensure their
safety. The Federation of Electric Power Companies (FEPC), which
comprises ten utilities, has summarized a policy designed to provide
more and higher quality industry information to the public. Since
systems to examine mechanical defects were not clear, the Nuclear
and Industrial Safety Agency (NISA) of the Ministry of Economics,
Trade and Industry (METI) will establish a new independent administrative
institution in October 2003, dedicated to introducing a new nuclear
inspection system requiring high levels of expertise, such as
review of inspection data. NISA will assume final responsibility
for safety reviews and inspections. The electric utilities, in
collaboration with the national government, will continue their
endeavors to promote nuclear energy and ensure safety.
The latest Long-Term Electric Power Facilities Development Plan
of Japanese utilities reveals that nuclear power generation will
play an important role in meeting the anticipated growing power
demand of the near future. We are firmly committed to nuclear
power generation and nuclear fuel recycling.
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