Power Line
The Federation of Electric Power Companies of Japan Vol.20
April 2003

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.

Dependence on Imported Energy Sources by Country

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.

The Closed Nuclear Fuel Cycle

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.