Thanks to reoperation of Takahama nuclear power No3 and No4, Kansai Electric Power Company cut electricity rate on August 1. One year after provisional disposition order of their shutdown issued by Otsu district court, they have done 4.29% cut on average realized by withdrawal of the order overridden by Osaka high court.
There seems to be two main objectives aimed at by rate cut.
First, to regain the customers captured by newcomers (including incumbent electric powers in other areas) during the shutdown of nuclear power. Second, to accelerate the capture of residential gas customers who are going to purchase both gas and electricity altogether by deeper rate cut. Already, to get large customers, newcomers are competing against Kansai’s rate cut, and seemingly, rate cut is now more than 10%.
What is waiting ahead of the battle?
Closely looking at Kansai’s rate-cut application form, we find that it holds a not well-known, but important figure. That is the decrease of demand. As the basis of rate-cut, they express not only the reduction of fuel cost produced by the reoperation of nuclear, but their own reduction of other cost (depreciation, repair etc). Therefore, they should have cut not only sales rate, but power wheeling rate.
Nevertheless they maintained wheeling rate unchanged this time. For the reason for that inconsistency, Kansai Electric cites the decrease of demand for electricity. The demand in Kansai area has decreased 10% approximately, they have no choice but maintain the present level for wheeling rate irrespective of cost reduction. That is the straight confession of reality surrounding all electric power companies. The era of stable demand increase is over. In addition to decrease of population and stagnant economy, spread of solar power caused by FIT, that of LED and smartphone make electricity demand structurally stagnant.
This tendency will not change for a long time.
Therefore, Kansai Electric, in real feelings, must have wanted to maintain their sales rate also, not to mention wheeling rate. But legally, they were forced to cut sales rate when reoperation of nuclear power plant (such as Takahama, Oi) realized. Furthermore, sales competition to gain customers is now so fierce that they had to offer big discount to regain former customers.
Electric market is now red ocean and it will be. If they mutually continue rate-competition by endless cost-cutting, and rate level falls below their own cost, especially fixed one, this industry will come to their limit shortly. If they avoid exhausting competition and gain revenue from such peripheral area as electric work & wiring for their own survival, that will be correct management. Otherwise, red scenery of this industry will be deeper.