Household electricity prices of Tokyo Electric Power Company (TEPCO), Kansai Electric Power, Chubu Electric Power and Kyushu Electric Power companies are expected to soar in November compared with the beginning of this year, with Tokyo Electric Power to log the biggest increase of 17 percent, according to Nikkei reports.
Kaoru Takeuchi, a Japanese science commentator, said 80 percent of Japan's electricity relies on fossil fuels, and higher fossil fuel prices will naturally lead to higher electricity prices.
Though about 80 percent of the natural gas needed for Japan's power companies is under long-term contracts and less directly affected by rising prices in the spot market, the power companies still face significant cost pressures given that the spot price of liquefied natural gas (LNG), according to Japanese media reports, has risen to more than 10 times that of the same period last year.
Ken Koyama, chief researcher at the Institute of Energy Economics, Japan, said that as the prices of natural gas and crude oil in Japan are linked and lag behind, the real fuel price rise is yet to come.
The natural gas market is facing an anomaly of high spot prices, and the supply and demand situation this winter is worrying, Koyama said.
Japan's four major power companies generate electricity in different ways, with varied dependence on thermal power. TEPCO, which relies heavily on thermal power after shutting down nuclear power following the Fukushima disaster, is under the greatest pressure to raise prices.
Fuel costs for generating power at TEPCO is going to rise more than 70 percent in November compared with January. Some media estimate that TEPCO's residential electricity prices will increase by 18 percent year on year in December, which will be the biggest increase since Japan's electricity retail was fully marketized in 2016.
Naohiro Niimura, an analyst at Japan's consultary firm Market Risk, said a severe winter would tighten supply and demand in the international market, and lead to higher prices, while power companies will have to increase their purchases of spot market gas.
The trend of rising electricity prices is likely to continue until next summer, Niimura added.
To minimize the upward pressure from electricity prices, the Ministry of Economy, Trade and Industry has called on power companies to build up LNG stocks.
The Japanese government has proposed that the country reduce its reliance on thermal power to 41 percent and restore nuclear power to 20-22 percent in fiscal year 2030.
Since the Fukushima nuclear accident in 2011, the development of nuclear power in Japan has almost been frozen. Nuclear power's share of electricity fell to 6 percent in fiscal year 2019.
Experts have predicted that the Japanese government will beef up efforts to restart nuclear power plants in the future, considering the pressure on thermal power plants and the increase of electricity prices caused by the fuel price hikes.
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