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The Tokyo Electric Power Company, Incorporated Business Information, Profile, and History

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History of The Tokyo Electric Power Company, Incorporated

The Tokyo Electric Power Company (TEPCO) is the world's largest privately-owned electric utility company. Japan has eight other major regional power companies--as well as the power company for the island of Okinawa, which the United States returned to Japan in 1973--but TEPCO alone supplies approximately one-third of Japan's electricity. In fiscal year 1990, the company distributed 219.9 billion kilowatt-hours (kWh) of electricity to 22.7 million industrial, commercial, and individual customers over a service area of 39,500 square kilometers. The service area includes Tokyo, its suburbs, and eight surrounding prefectures, among them Kanagawa prefecture, which includes the city of Yokohama.

In the ongoing conversion to low-polluting fuels, TEPCO is the world's largest importer of liquefied natural gas (LNG), and accounts for approximately one-fourth of the global LNG trade. The company also orchestrates the import of nuclear fuels, their international processing, and their disposal, as a major component of the national program to make nuclear power the leading form of energy by the 21st century.

The company has its roots in Japan's first electric utility, Tokyo Electric Lighting Company, which emerged in the mid-1880s, although TEPCO only dates its incorporation from 1951, the year in which the Japanese electric power industry returned to private ownership after government monopoly control during World War II.

Even as the world's first public power stations were being established in London and New York in 1882, the Meiji government, in its effort to modernize Japan, formed an Institute of Technology. English and other foreign experts were invited to Tokyo to train the Japanese in the technology. In November 1885, Tokyo Electric Lighting Company used a Japanese-made portable generator to light 40 incandescent lamps in the Bank of Tokyo. Regular service began the following year when the company, capitalized at ¥200,000, was granted a charter to generate and distribute electricity and sell lighting accessories. A coal-fired thermal station, generating 25 kilowatts (kW), began operating in November 1887. By 1892, 14,100 lamps had been installed in post offices, banks, ministries, and Japan's first modern factories.

Tokyo Electric Lighting Company used thermal plants because coal was plentiful; the only other domestic energy resource, major river systems, was beyond the range of its primitive transmission technology. Hydroelectric power generation, introduced by the city of Kyoto in 1891, would become Japan's leading prewar electricity source, but was available to Tokyo only over long-distance trunk lines.

The company began to consolidate neighborhood thermal plants and by 1897 had ten units in Asakusa Kuramae power station, aggregating a capacity of 2,390kW. Distribution efficiency improved in 1907 with 55 kilovolts (kV) transmission. By 1911 the company was also making tungsten bulbs.

In the same year the government consolidated ad hoc legislation over the rapidly growing industry with an Electric Utility Industry Law. From then on, power plants had to be licensed, and regulation began providing for common use of transmission lines. War, too, had become a spur to growth. The Sino-Japanese war of 1894-1895 boosted Japanese industry with its procurement demands. At the same time tramcar systems proliferated in Tokyo and other Japanese cities.

Following the 1904-1905 Russo-Japanese War, the government promoted heavy industry and the electric power industry also grew rapidly, becoming second only to banks in terms of capital. Tokyo Electric Lighting Company, now able to draw power from hydroelectric stations in the hinterland, remained the largest utility in the country even as the number of generating and distribution companies rose from 11 in 1892 to 1,752 by 1915. Its service region encompassed the political capital, a major university center, and a burgeoning of satellite heavy-and light-industrial complexes and their international trading ports.

Japan was allied to Britain and France in World War I. While British and French industries were occupied in war production, exports of Japanese light-industrial goods to Europe soared, notably raw silk, but also tea, toys, household utensils, and machine parts. In 1925, the total number of companies in the electricity utility field peaked at around 3,000.

In September 1923, however, there came a huge setback, the Great Kanto Earthquake, accompanied by fires which destroyed much of Tokyo and Yokohama. International aid poured in and the restoring of utilities was given the highest priority. By 1924 the company was again moving forward in the development of a national grid. It had been among Japanese companies importing American equipment which produced current at 50 Herz (Hz). Companies in western Japan, including Osaka, had opted for German equipment, delivering 60Hz. New transmission technology could now deliver and convert hydroelectric power from the hinterland mountain regions. This began the wide area electric power exchange system, which continues to overcome power shortages in the Tokyo region.

In the 1920s Europe was again producing light-industrial goods, and the Japanese economy slid into severe depression. Japan's leading export, raw silk, slumped by more than half. There was fierce competition in the electric power industry. In some cases, three power companies supplied a single customer at different times of the day. Tokyo Electric Lighting Company began absorbing bankrupt competitors during an industry shake-out.

By 1928 it was the largest of the Big Five utilities operating the self-regulating Electric Power Control Council. In general, Japan's industries were adopting the cartel system in an effort to stabilize the marketplace. At the same time, militarist factions were turning the nation toward war in mainland China; by 1932 the government began enforcing a revised Electric Utility Industry Law. This gave the bureaucrats the final say on rates, company mergers, and even expropriation of utilities for military production.

By 1937 governments increasingly dominated by personalities wanting to emulate the German and Italian imperial example had led Japan into full-scale war against China. Tokyo Electric Lighting Company, along with the rest of the industry, came under state control in 1938. The core legislation established the Japan Electric Generation and Transmission Company (JEGTCO) or Nippon Hasso Den. The Electric Utility Bureau of the Ministry of Communications supervised the industry. The Japanese government wanted to ensure an abundant supply of cheap electricity for military production. Government permission was required for rate levels, building new power stations, or installing transmission lines. Tokyo Electric Lighting Company was at that time a component of what was, in effect, one of the largest electricity companies in the world.

By 1942 the framework for exerting state control over the electric power industry was firmly in place. In 1943 the task of supervision passed to the Electric Power Office of the Ministry of Munitions. The industry thus became part of the mobilization for global war. Hydroelectric power development took priority, and 17 new plants were built on river systems across the country. The Tokyo region could use only coal-fired thermal plants locally. The military planning brought a national grid closer to reality, however; Tokyo and most of eastern Japan were standardized on 50Hz current while all western Japan now used 60Hz. Military intervention, however, had in fact slowed down development. In the four years before World War II, electricity production capacity had been increasing at an annual rate of 600MW. During the war years, annual growth in capacity declined to an average 170MW.

When Japan surrendered in 1945, Tokyo had been bombed and burned to rubble. Facilities of the former Tokyo Electric Lighting Company represented a large proportion of the 44% of thermal power plant capacity that had been destroyed nationwide. The JEGTCO monopoly was transferred to the Ministry of Commerce and Industry, forerunner of the Ministry of International Trade and Industry (MITI). The American-led military occupation authorities of Japan initially intended to return the nation to the level of an agricultural economy. By August 1946, surviving equipment in some 20 war-damaged thermal power plants had been included among factory machinery which was to be shipped to Asian countries invaded by Japan, in part-payment of war reparations.

The national industrial base had been almost halved by air-raid destruction, and with the munitions factories closed, Japan started out anew in 1945 with a surplus of electric power capacity to demand. With their legendary energy, however, the Japanese began to reconstruct factories from whatever machinery was available. As early as 1946, electric power demand increased by 25% and rose by an average of 10% for the next several years.

The Allied occupation at first refused to allow new capacity to be added, fearing that this might be a first step toward rearmament. By 1948, the JEGTCO monopoly was targeted for breakup, along with other industrial and financial concentrations, like the zaibatsu. Just how this was to be accomplished became an issue of heated debate among the Japanese leaders and the Allied occupation planners over whether centralized state control should continue, or whether utilities should return to private ownership. The situation was complicated by the rising power of unions encouraged by occupation policies. Paradoxically, unions in the electric power industry tended to favor state control for job security, and from 1946 often-violent strikes began, with the aim of ensuring a future for domestic coal fuel, among other issues.

The Cold War began to change U.S. priorities for Japan; for the strategy of containing Stalinist communism, it was becoming more desirable to have an industrially strong Japan with at least a military capability for self-defense. One of the most influential Japanese voices regarding electricity utility reform proved to be that of Yasuzaemon Matsunaga. This Meiji Era entrepreneur was an important link between the prewar Tokyo Electric Lighting Company and the TEPCO that emerged in 1951. He had no direct business ties to the Tokyo utility, but was a role model for Kazutaka Kikawada, who became TEPCO president during the high-growth economic breakthrough of the 1960s.

Matsunaga had prospered in western Japanese electric utilities and electric railways early in the century. By 1924 he was president of the Japan Electric Association. He opposed the military takeover, and when the JEGTCO monopoly was imposed in 1938 retired to private life. In the postwar debate over future policy, he championed the private enterprise solution and his views prevailed.

While the debate continued, in May 1949 the MITI was established and its Agency of Natural Resources assumed control of utilities. Finally, on November 24, 1950, the government invoked occupation powers to force reform legislation through parliament. From December 1950 a Public Utilities Commission, comprising businessmen and academics, free of political control, divided the nation into nine regions, each with a privately owned electric power company, to begin operating in May 1951. TEPCO assumed the assets and liabilities of JEGTCO in the Tokyo region, including a subsidiary, the Kanto Power Distribution Company.

The Korean War had been underway since June 1950 and from its inception TEPCO played a leading role in supplying power to a still-occupied and capital-starved Japan. TEPCO relied on power transferred from distant hydroelectric stations for 80% of the supply for the Tokyo region.

The Korean War was the first of a succession of unforeseen circumstances fostering the Japanese economic miracle. It stimulated the first postwar boom because Japan was the main rear-base for American-led United Nations forces turning back the invasion of South Korea by the communist North Korea. The extent to which U.S. policy toward Japan had been reversed is indicated by the fact that in April 1952 MITI was permitted to exclude thermal power station equipment from the list of machinery earmarked, in principle at least, for shipment abroad as war reparations.

TEPCO began increasing rates to profitable levels and cashflow was helped further by an easing of the tax structure, allowing more generous depreciation write-offs. What was emerging was the uniquely Japanese modification of classic free-enterprise capitalism based on competition but also due consideration for overriding national goals. State planning continued to have a role, especially for ensuring stability of supply for something as crucial as energy.

At an early stage TEPCO management gave priority to developing a new generation of managerial talent. In-house training courses have now reached the level of university education.

While TEPCO and the other regional companies were evolving as private enterprises, as early as 1951 Matsunaga succeeded in establishing a Central Research Institute for the Electric Power Industry. By 1952, the Prime Minister's Office had added an administrative Electric Power Development Coordination Council. A government-financed Electric Power Development Company, Ltd. (EPDC), capitalized at ¥100 billion, took on the job of developing major new hydroelectric power stations.

The Allied occupation ended in April 1952. By November, a Federation of Electric Power Companies had been organized and numerous symposiums and study groups debated whether the country should limit itself to the domestically available coal and hydroelectric energy resources. External events were to influence the outcome once more; in particular, technology became available from the United States and Europe, and oil became increasingly cheaper.

Studies began on the potential of nuclear power as early as 1954, although Japan was as barren of uranium ores as it was of oil. TEPCO research laboratories began exploring nuclear power in 1955, ahead of the promulgation in December of that year of an Atomic Energy Basic Law to guide the industry. In January 1956 the Prime Minister's Office added an Atomic Energy Commission to its roster of administrative bodies. The Japan Atomic Energy Research Institute (JAERI), funded by both the government and the industry, opened in the same year. A separate entity, the Japan Atomic Power Company, followed in November 1957. TEPCO could coordinate its nuclear future through these and other supplementary organizations.

In 1958 the company became a founding member of the Japan Electric Power Information Center (JEPIC), whose major purpose was to promote technological exchanges with American and European utilities. High-voltage transmission and bridging the disparate frequencies in the two halves of the country became priorities. In 1959 a new Central Electric Power Council supervised the opening of the Tadami Line, linking the 50Hz system of TEPCO and the hydroelectric plants of the Tohoku Electric Power Company far to the northeast of Tokyo.

In 1961 Kazutaka Kikawada became president of TEPCO. Kikawada had joined the Tokyo Electric Lighting Company in 1926 during the depression. He had studied economics at Tokyo Imperial University, and had developed an interest in the problems of unemployment and social welfare. He took the TEPCO helm just as Prime Minister Hayato Ikeda was launching a program to double the national income within a decade, boosting public spending, reducing taxes, and lowering interest rates. Ikeda, who had become prime minister in 1960, was disabled by cancer in 1964, but by then Japan had joined the Organization for Economic Cooperation and Development (OECD) and had developed a domestic market whose prospering consumers would underpin manufacturing growth in the decades ahead.

Matsunaga, who had headed yet another commission planning the way forward for utilities in 1960, had been Kikawada's entrepreneurial model. As TEPCO president, in 1963 Kikawada also became chairman of the Keizai Doyukai, the Japan Association of Corporate Executives. This business association, formed in 1946, focused mainly on the appropriate role of private enterprise in improving the quality of life in general; today it is affiliated with six similar business organizations in Europe, the United States, and Australia, involved in developing a private-sector role for easing global economic problems. Kikawada also became chairman of an advisory Economic Council of the Economic Planning Agency during 1966 and 1967.

The prosperity of the 1960s brought a proliferation of electric home appliances and air-conditioning. TEPCO's peak demand season shifted from winter to summer, and the Tokyo region needed more and more supplementary power. In October 1965, the 50Hz system of eastern Japan was able for the first time to exchange power easily with the 60Hz system of western Japan through a sophisticated frequency converter station in central Japan. From 1963, thermal power generation had taken the lead over hydroelectric sources nationwide. By 1973 TEPCO's long-term development plan, applying large-scale thermal power generation technology, had quadrupled the company's capacity of eight years earlier.

Increasing American involvement in Vietnam throughout the 1960s accounted in part for orders flooding into Japan; heavy and chemical industries developed rapidly. As in the Korean War, Japan provided a major Asian support base, repairing air, land, and sea-battle equipment and supplying many materials and services. While U.S. industry met wartime priorities, new export markets opened for Japan, notably in consumer electronics. TEPCO, teamed with Japan's general trading houses (sogo shosha), began to diversify its overseas sources of fuel; Japan was following the rest of the industrial world into an era of oil-fired thermal power generation.

Air pollution reached critical levels, and in 1967 TEPCO turned to Indonesia for low-sulfur Minas crude oil. In 1970 its Minami-Yokohama Thermal Power Station became the first in the world to use liquefied natural gas (LNG), from Alaska. By 1973, coal-firing had been discontinued. Pilot nuclear power plants had begun operating in 1966; in 1971 TEPCO began operating Japan's third boiling-water reactor (BWR). The main supplier of the reactor and technology was General Electric of the United States.

TEPCO located its nuclear-power plants far from the crowded capital region, on the coast of Fukushima prefecture to the north, the service region of its longtime partner, the Tohoku Electric Power Company. By 1979, five further BWR reactors had been added to the Fukushima No. 1 complex. The company now used its own technology, and contracted construction to other Japanese corporations that were experts in the field. Despite potential earthquake hazards, nuclear power began gaining ascendancy, mainly to reduce air pollution. In 1970 the government legislated severe controls on air, land, and water pollution. An Environmental Agency on the American model emerged in 1971. The oil crisis of 1973-1974 reinforced commitment to a nuclear future.

TEPCO declared a state of emergency and began shifting away from oil, a process accelerated by the second oil crisis at the end of the 1970s. Between 1973 and 1981, the share of nuclear fuel in the overall fuel mix increased from 3% to 21%. LNG consumption rose from 1.4 million tons annually to 6.9 million tons. The share of oil in thermal power generation declined from 90% to 56%. The company also researched new coal-burning technologies, from Coal-Oil-Mixture to the gassification of raw coal. By 1984 one major thermal power station had been converted back to improved coal fuel, and another is planned for 1993 in a joint-venture with Tohoku Electric Power Company.

The company entered the 1990s under the leadership of Gaishi Hiraiwa. Hiraiwa was elevated to chairman and chief executive officer in 1984. After graduating from Tokyo Imperial University Faculty of Law, and after briefly joining Tokyo Electric Lighting Company in 1939, he was drafted into the army and sent to war in China. After the war, he rose to become TEPCO's president in 1976. Hiraiwa was chairman of the Economic Council advising the government, and in December 1990 was elevated from vice president to chairman of the powerful Federation of Economic Organizations (Keidanren).

Under Hiraiwa's leadership in the 1980s, TEPCO moved into the realm of high technology applied far beyond the boundaries of the electric power industry. In 1980 Japan adopted a Law for Promoting Development and Introduction of Alternative Energies to Oil. By 1991, TEPCO was operating 13 of the 17 nuclear reactors installed in operating power stations; two more were under construction and another was in the advanced planning stage. The Three Mile Island and Chernobyl nuclear accidents revived popular opposition to nuclear technology in Japan. This has delayed but not halted the development of nuclear power; TEPCO and the government emphasized a net gain in combating conventional pollution, at least, which was still severe in Japan. A need for more generating capacity became evident in the 1991 summer peak demand season when Tokyo was close to requiring rationing.

TEPCO imports uranium ores from the United States, Canada, Australia, and Niger. Specialized processing has been carried out in the United States, Canada, the United Kingdom, and France, and spent nuclear fuel sent to the United Kingdom and France for reprocessing. Both uranium enrichment and spent-fuel reprocessing have begun to be carried out in Japan, however, and nuclear power stations are adding repositories for low-level wastes. In 1991 nuclear power accounted for 28% of TEPCO's total generation; this is projected to reach 39% by the year 2000.

TEPCO fully considers national policy needs in its business decisions. Since the 1970s, the main contractors for its nuclear power plants have been Toshiba and Hitachi. To ease trade friction, equipment orders for two new plants were switched to the General Electric Company (GEC) of the United States. TEPCO also turned to GEC for advanced gas turbines and generators to enhance the efficiency of thermal plants fired by LNG. In 1991 TEPCO was the world's largest user of LNG (along with LPG). The LNG share in TEPCO's thermal power fuel mix increased from 10% in 1973 to 56% in 1991. TEPCO buys from suppliers as far afield as Alaska, Brunei, Abu Dhabi (Das Island), Malaysia, Indonesia, and Australia. Through trading houses such as Mitsubishi Corporation and Mitsui & Company, it seemed likely that TEPCO would have access to Russian LNG resources on Sakhalin Island, and possibly on the Siberian mainland if Russia followed through on invitations for shared development with Japan.

Oil had dwindled from 47% of TEPCO's total generating facilities in 1970 to 21% in 1990, and was projected to shrink to 15% by 2000 even before the Gulf War provoked new concern about supply stability. Hydroelectric power, representing 88% of supply in 1952, the company's first full year of operation, has leveled off at around 9%; it survives for peak load demand fluctuations in a strategy of nuclear power for "base load" and LNG for "middle load". Coal has been returned to the list of fuels in less-polluting guises, partly because the new technologies should make it possible to begin buying American and other coals as well as Australian as a trade-balancing measure.

TEPCO is heavily involved, domestically and internationally, in research and development (R & D). In 1991 the central Engineering R & D Administration alone had 400 staff. Already TEPCO is using new types of chemical fuel cells for local electricity supplies and electric power storage cells to help during peak demand, harbingers of future alternatives. Like many Japanese corporations, TEPCO maximizes the application of its technology and expertise wherever opportunity beckons.

In 1986, for example, when the Japanese government began to liberalize the telecommunications market, previously monopolized by Nippon Telegraph and Telephone Corp. (NTT), TEPCO used its expertise in computerized power grid communications in joining with two sogo shosha to form Tokyo Telecommunications Network Company, Inc. (TTNet) to develop an optical fiber digital network for facsimile, data, and public telephone services. This led to mobile communications and, in 1989, a TEPCO cable television system. The founding president of TTNet was Kazuo Fujimori, who had joined TEPCO in 1951 as an engineer and had become executive vice-president.

Research into nuclear power plant safety under earthquake conditions is also being applied to prototype high-rise buildings which can adjust to withstand earthquake vibrations. This is a contribution to Tokyo's major waterfront urban redevelopment projects. In seeking to reduce peak demand, TEPCO technologies have given Tokyo its first district air-conditioning system using waste heat on the heat-pump principle; in some cases the heat is extracted from river waters warmed by factory discharge, in others heat is recovered from sewage beneath high-rise "new towns". TEPCO recycles 60% of the copper used in power lines. TEPCO's laboratories are researching high-temperature industrial ceramics, superconductivity, and artificial intelligence for computers.

TEPCO is involved with major international research projects in the United States and Europe while encouraging visits from overseas students and scientists. TEPCO technology has enabled the company to achieve the world's lowest levels of sulfur dioxide and carbon dioxide emissions; research has revealed the photosynthesis potential of seaweed for absorbing carbon dioxide. At the 1991 Tokyo Auto Show, TEPCO displayed an electric car prototype that can reach 170 kilometers per hour and can drive the 500 kilometers to Osaka without a battery recharge. Because of these wide-ranging activities, the company has begun to refer to itself as the TEPCO Group. It has entered international capital markets with the issue of corporate bonds.

Principal Subsidiaries: Kandenko Company, Ltd. (46%); Tokyo Telecommunication Network Company, Inc. (33%); The Japan Atomic Power Company (28%).

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