Tepco’s Profit Plummets Amid Declining Sales and New Competitionby
Operating profit falls by 37 percent in the first quarter
More than 750,000 Tepco customers have switched providers
Tokyo Electric Power Co. Holdings Inc., operator of the wrecked Fukushima Dai-Ichi nuclear plant, said first-quarter operating profit plummeted 37 percent as sales declined amid faltering demand and new entrants into Japan’s power market.
Tepco, as Japan’s biggest utility is known, posted operating profit of 143.6 billion yen ($1.37 billion) for the three months ended June 30, down from 228.3 billion yen a year ago, the company said in a statement Thursday.
Revenue fell about 18 percent to 1.26 trillion yen as the company’s electricity sales volume dropped and rates were automatically lowered by the nation’s price adjustment system. The system adjusts monthly electricity rates for each utility based on a three-month average of import prices for LNG, crude oil and coal.
Japan’s regional utilities are getting squeezed by new entrants after the country liberalized its retail power market in April, allowing consumers to choose their electricity providers for the first time. Tokyo Electric hopes to boost its profits by expanding its domestic gas sales when the market fully opens up next year, increasing its foreign investments and restarting its operable nuclear reactors.
About 762,500 electricity consumers have switched from Tepco to a new provider as of June 30, according to data from the Organization for Cross-Regional Coordination of Transmission Operators. The number of households and small businesses switching is still a small portion of Tepco’s customer base of more than 29 million. Power usage in Japan dropped last year to the lowest level since 1998 as households and businesses conserved electricity amid a stagnant economy and shrinking population.
A decline in fuel prices has provided relief for the utility, as it also struggles to win approval to restart its atomic units and copes with decommissioning costs for the wrecked Fukushima Dai-Ichi facility. Japan paid an average of $5.85 per million British thermal units in June for liquefied natural gas, the lowest level since June 2005, according to data from the Ministry of Finance.
Tepco’s first-quarter net income was 1.1 billion yen, compared with 203.3 billion yen a year ago. The company’s net income is influenced by costs related to the payout to those affected by the Fukushima nuclear accident more than five years ago.