Summary of Comments Made at a Press Conference by Hiroji Ohta, FEPC Chairman, 17 December 1999

17 December 1999

With only two weeks remaining in the year, I would like to take a moment today to thank the members of the Energy Industry Press Club for their support since I was elected FEPC chairman in June.

I would also like to briefly review what has undeniably been a difficult year for the electric power industry. In addition to the accident at the JCO plant, irregularities in MOX fuel data supplied by the BNFL also recently came to light.

The year was also characterized by increased dependence on global information networks, and in Japan, by restructuring in the banking and automobile industries. It was also a year that saw regulatory reform in the areas of finance, accounting and taxation, as well as the streamlining of pension plans, extended-care insurance and other social security programs.

In Reference Document 1, you will find a review of various developments this year that affected the nation's electric power industry.

As you know, after two and half years of deliberation, the Electric Utility Council has announced that the electric power industry will be deregulated as of March 21, 2000. In addition to allowing new power suppliers to enter the market, deregulation will permit existing power companies to compete for the special high-voltage customers who currently account for about 30% of total demand.

Although deregulation will pose new challenges, our member companies view increased competition as a change for the better. They are currently strengthening their management and developing new pricing schedules and services that will allow them to prosper and grow. I believe that the new spirit of competition between power companies, and between existing companies and new power providers, will bring a positive change to pricing schedules and service offerings. However, increased competition will not change the fact that Japan is poor in energy resources, nor will it help us address the problem of global warming.

Although deregulation will be limited to the area of special high-voltage demand, this reflects Japan's complete lack of energy resources, the unique nature of its electric power industry, and the need to balance economic pressures with the public interest. I therefore believe that partial deregulation is a solution that is ideally suited to Japan's unique situation. Furthermore, as we strive to boost efficiency and economy in the face of increased competition, we must keep the public interest in mind -- and continue to address issues such as energy security and global warming.

With respect to nuclear power, progress is being made in addressing a number of long-standing issues. The task of reviewing our long-term nuclear energy plans is about to begin again after a five-year hiatus; the Nuclear Power Section of the Advisory Committee on Energy Policy has released an interim report on high-level radioactive waste and dismantled nuclear facility waste disposal; and the delivery of MOX fuels to the Fukushima Daiichi and Takahama Nuclear Power Plants has begun. All of these developments are helping us move forward.

Unfortunately, setbacks such as the Japan Atomic Power Company Tsuruga No. 2 Plant coolant water leak, the JCO Tokai Plant accident, and the recent MOX fuel data irregularities have taken their toll. For myself, and for the industry as a whole, the JCO accident was certainly the year's most shocking development. As I have stated before, we are taking the matter very seriously, and are fully aware of the damage it has done to the public trust in nuclear power.

On the 9th of this month, some 35 companies and research institutes affiliated with the nuclear power industry joined together to create the Nuclear Safety Network. The fact that we were able to establish this organization within a period of only two months reflects our strong commitment to stringent industry-wide safety standards.

However, what is most significant is not the Network's establishment, but its ongoing presence. With the NS Network in place, the industry will be prevented from ever again becoming complacent about safety issues.

The need for the network was brought home to us yesterday, when it was revealed that there were irregularities in the data for the MOX fuel supplied by BNFL to the Kansai Electric Power Company's Takahama No. 4 Plant. At this morning's presidential meeting, President Ishikawa of KEPCO stated that he would suspend use of MOX fuel and order a thorough investigation. We are concerned about the effect this incident may have on the nation's plu-thermal energy plans, and intend to seek public understanding of the need for their continuance.

At noon today, representatives of the electric power industry met with Prime Minister Obuchi to unofficially discuss nuclear and electric power policy. I believe Mr. Tonozuka, FEPC Managing Director, has already provided you with an outline of that meeting. At the meeting, the Prime Minister stated that public safety remains a top priority, and that the need to maintain energy security and protect the environment requires an undiminished commitment to current nuclear power policy. In view of the paucity of Japan's natural resources, we of the electric power industry believe that we must press forward with nuclear power generation and nuclear fuel recycling, and deal with various issues and problems one at a time.

Next year, a new law affecting high-level radioactive waste disposal will be enacted, and in the fall, a new body will be established to coordinate disposal operations. In the meantime, many issues need to be resolved, including the location of a spent-fuel interim storage facility, and the conclusion of a safety agreement with Aomori Prefecture regarding the Rokkasho Reprocessing Plant. While we recognize that the road ahead will not be an easy one, we will do our best to promote nuclear power development for the benefit of generations to come.

In conclusion, I would like to comment on the domestic business environment. Thanks to increased public works spending and the reduction of taxes on housing, the economy seems to be recovering at last from its long decline.

Please refer to the November electricity demand bulletin that was released today. Large industrial-user demand, a key economic indicator, is shown at the bottom-left of the first page. Although demand fell steadily for 19 consecutive months from January 1998 to July 1999, it finally began to improve in August. It continued to rise through November, when an increase of 3.3% was recorded across the ten electric companies. Results by sector, shown on the bottom right of the same page, reveal an increase in most major industries, with steel (+4.7%) and electric machinery (+5.4%) recording particularly sharp increases. Even in sectors that were down from the previous year, it can be seen that the rate of decline has slowed considerably.

Although unemployment remains high, and consumer spending and private investment continue to be sluggish, large industrial-user demand indicates that the economy has turned the corner to recovery.

Next year, I believe we will begin to see the results of new economic measures and harsh restructuring implemented in the private sector. I hope that individuals and companies will regain confidence in the economy, and move forward into a new era of growth.

Lastly, I would just like to say that I know many of you, like us, will be spending the New Year transition period addressing potential Y2K problems. For our part, we are reviewing our information liaison and preparatory systems, and doing everything possible to ensure a smooth transition.