TOKYO: Japanese electricity utilities, already reeling from high fossil fuel bills to replace idled nuclear units after the Fukushima disaster, are being hit further by the falling yen, which is increasing costs that can't be recouped, executives said.
Tokyo Electric Power Co, Kansai Electric Power Co and other regional monopolies are having to shell out more for imports of fuel that is priced in US dollars as the yen hovers near six-year lows.
Under a complex formula, fluctuations in the prices of oil and other fossil fuels can be automatically reflected in electricity bills, but utilities cannot recoup all the additional costs because the adjustment system assumes their reactors are operating.
The last operating nuclear reactors out of Japan's total of 48 were shut in September last year and most have been idled for more than two years, while a new watchdog assesses their safety following the meltdowns at Tokyo Electric's Fukushima Daiichi plant after an earthquake and tsunami in March 2011.
The cost of "oil rises due to the weaker yen. There's a fossil fuel adjustment system in place, but that is based on an assumption that nuclear reactors are in operation", Hokuriku Electric Power Co President Susumu Kyuwa told a press conference on Friday.
"So while there's no nuclear power, there is definitely an impact on our business and I am watching the currency swings carefully," Kyuwa said.
The yen fell to a six-year low of 109.46 late last week as expectations that the US Federal Reserve will start its rate-tightening cycle sooner than expected have led to a broad dollar gain this month.
A weakening of one yen per dollar raised Tokyo Electric's fossil fuel costs by 28 billion yen ($257 million) in the business year ended in March, industry data shows.
For Kansai Electric the figure is 13 billion yen, with the total impact on the 10 utilities reaching 76 billion yen, industry data showed.
"Utilities have been replacing lost nuclear power with fossil fuel-fired power generation, and fuel consumption is on the rise, so the weak yen is hurting all of us and squeezing profits," Kansai Electric President Makoto Yagi said on Friday.
The utilities, though, have got some relief as oil is trading near a more than two-year low and thermal coal is not far from five-year lows, helping offset some of the falls in the yen.
The Federation of Electric Power Companies said it couldn't quantify the amount that its members can't adjust on electricity bills because each utility had different levels of reliance on nuclear units before the shutdown.
Kansai Electric, Kyushu Electric Power Co and Shikoku Electric Power Co relied the most on nuclear power before the Fukushima crisis.
The utilities relied on nuclear units for about 40 percent of their electricity generation before Fukushima, compared with the national average of less than 30 percent.
The following table lays out the impact of a one yen decline per dollar on increasing utilities' fossil fuel costs for the business year ended in March, according to industry data.
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