Japan government begins discussing relief measures for power, fuel costs

The Yomiuri Shimbun

16:37 JST, October 26, 2022

Government discussions began Wednesday on relief measures against the soaring prices of electricity, city gas and gasoline, according to several sources.

The measures would be implemented through the end of September next year. They are expected to reduce the burden on a standard household by an estimated ¥45,000 over the nine months from January.

A draft plan was presented to a general policy research meeting of the ruling parties Wednesday, and will be included in the comprehensive economic package to be approved Friday by the Cabinet. The relief measures will be a pillar of the economic package, which will battle high prices through the injection of more than ¥20 trillion in state funds, financed primarily through the issuance of deficit bonds.

Through the relief measures, the government will subsidize household electricity rates by ¥7 per kilowatt-hour, equivalent to an about 20% cut from the current rate. Electricity prices are expected to rise more than 20% from next spring, and the planned subsidy should help offset this increase.

Corporate electricity rates will be subsidized at a rate of ¥3.5 per kilowatt-hour.

The government will also effectively pay the levies imposed on every electricity user under the feed-in tariff (FIT) system to support the introduction of renewable energies.

For city gas, the government will provide ¥30 per cubic meter to households and companies with annual contracts of less than 10 million cubic meters. For LP gas, it will help operators streamline deliveries, thereby curbing price hikes.

The government had already decided to extend a subsidy program to rein in gasoline prices until the end of this year, but is considering extending it through the end of September 2023. The subsidy is currently capped at ¥35 per liter, but will be gradually lowered from January next year.

Critics say measures to combat soaring energy prices run counter to decarbonization efforts. The economic package to be submitted Friday will stipulate that the government is seeking the “promotion of energy conservation, renewable energy and nuclear power.” To promote energy saving, the government will intensively support companies’ multiyear investment plans over the next three years.

Energy prices remain high. TEPCO Energy Partner Inc.’s average fee for households in November will be ¥9,126, up 24% from the same month the year before, while Tokyo Gas Co. will charge an average ¥6,461, or up 31%.

Both TEPCO and Tokyo Gas have already reached the price ceiling of the fuel cost adjustment system, which was established to reduce the burden on power users by automatically adjusting monthly electricity fees based on fluctuations in fuel prices. Power rates could rise further if the method of calculating rates is revised in the future.

Gasoline and other fuel oil prices have been kept in check since January, when the government introduced a system to subsidize oil wholesalers. The price of regular gasoline is currently hovering around ¥170 per liter, compared to the more than ¥200 it would have been without the system.