The enormous cost of building new nuclear power plants translates directly into huge profits
Posted: Tue Jul 01, 2025 10:53 am
As of March of this year, TEPCO's total assets were approximately 14.8 trillion yen. Apart from the aforementioned individuals, financial institutions, and shareholders of the power company, it would be common sense to think that this should be poured into compensation for the nuclear accident and into the development and market expansion of renewable energy.
In fact, the reason why electric power companies have abandoned this option and instead focused solely on promoting nuclear power is because of the pricing system that has allowed them to build up such assets.
What is the "full cost method" that determines the "profits" of electric power companies...?
Enlarge photo
What is the "full cost method" that determines the "profits" of electric power companies?
Because electricity is an essential energy source for life, the "full cost remove background image method" (hereafter referred to as "full cost") is used to set prices, which allows for the reliable recovery of investment costs, under the pretext of stabilizing the supply (see diagram on the right). The key to this is buried at the bottom of a huge number of METI ordinances. It is a calculation formula written in the "General Electricity Business Supply Provisions Price Calculation Rules," a ministerial ordinance based on the Electricity Business Act.
Article 19 of the regulation stipulates that "electricity fee revenue = total cost + remuneration." "Remuneration" means "profit." The remuneration amount is calculated by multiplying the "rate base = cost," which consists of specific fixed assets, assets under construction, nuclear fuel assets, specific investments, working capital, and deferred depreciable assets, by the "remuneration rate." The method for calculating the remuneration rate is stipulated in Article 4 of the regulation. When raising rates, electric power companies apply to the Agency for Natural Resources and Energy, and the assessed remuneration rate is applied until the next rate revision. As of June 3, the average remuneration rate for all electric power companies is 3.05%. According to the responsible department, there was a time when the remuneration rate was around 8%.
In fact, the reason why electric power companies have abandoned this option and instead focused solely on promoting nuclear power is because of the pricing system that has allowed them to build up such assets.
What is the "full cost method" that determines the "profits" of electric power companies...?
Enlarge photo
What is the "full cost method" that determines the "profits" of electric power companies?
Because electricity is an essential energy source for life, the "full cost remove background image method" (hereafter referred to as "full cost") is used to set prices, which allows for the reliable recovery of investment costs, under the pretext of stabilizing the supply (see diagram on the right). The key to this is buried at the bottom of a huge number of METI ordinances. It is a calculation formula written in the "General Electricity Business Supply Provisions Price Calculation Rules," a ministerial ordinance based on the Electricity Business Act.
Article 19 of the regulation stipulates that "electricity fee revenue = total cost + remuneration." "Remuneration" means "profit." The remuneration amount is calculated by multiplying the "rate base = cost," which consists of specific fixed assets, assets under construction, nuclear fuel assets, specific investments, working capital, and deferred depreciable assets, by the "remuneration rate." The method for calculating the remuneration rate is stipulated in Article 4 of the regulation. When raising rates, electric power companies apply to the Agency for Natural Resources and Energy, and the assessed remuneration rate is applied until the next rate revision. As of June 3, the average remuneration rate for all electric power companies is 3.05%. According to the responsible department, there was a time when the remuneration rate was around 8%.