Hokuriku Electric Power Company

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Hokuriku Electric Power Company

15-1 Ushijima-cho
Toyama City 930
Japan
(0764) 41 2511
Fax: (0764) 32 4975

Public Company
Incorporated: 1951
Employees: 5,543
Sales: ¥394.3 billion (US$3.16 billion)
Stock Exchanges: Tokyo Osaka

Hokuriku Electric Power Company is one of the nine regional power companies that generate, transmit, and distribute electricity throughout Japan. The Hokuriku district consists of three prefectures in the middle of Japan’s main island of Honshu. The three prefectures—Toyama, Ishikawa, and Fukui— border the Sea of Japan on the north and are separated from Japan’s industrial centers of Kanto and Kansai by the Japan Alps. The numerous rivers running toward the sea from these mountains have provided Hokuriku with abundant electric power since the early 1900s and today Hokuriku Electric Power relies on its rivers for 40% of its power. With its rich cultural heritage and majestic scenery, the Hokuriku district of Japan is a favorite tourist attraction. Recently it has also become important as a regional center of high-technology industry.

Hokuriku Electric Power was formed as a company on May 1, 1951 when the General Headquarters of the Allied Powers (GHQ) under General Douglas MacArthur approved a plan submitted by the Japanese government to reorganize and rationalize the electrical power industry. Although as a corporate entity Hokuriku Electric Power is relatively young, its roots can be traced back to the end of the 19th century when electricity was first introduced into the region. The history of electric power in Japan as a whole goes back to 1878 when Professor W.E. Aryton of the Institute of Technology in Tokyo unveiled an arc lamp to celebrate the opening of the Central Telegraph Office. Japan’s first electric utility company, Tokyo Electric Lighting Company, was established in 1887, four years after Thomas Edison had invented the incandescent lamp in the United States. Its first electric power plant was completed in 1887 as a 25 kilowatt (kW) facility in Nihonbashi, Tokyo. Japan has always been able to effectively assimilate and improve upon outside technology and ideas, and electric power was no exception.

The introduction of electricity to the Hokuriku region was initiated by an industrial exposition in the city of Toyama in 1894. A merchant named Kokichi Mitsuda displayed an electric lamp powered by a portable generator he had brought from Tokyo. A young Toyama businessman named Matazacman Ka-naoka was impressed by the lamp and generator, and realized the implications of electricity. Kanaoka also heard about the development in Kyoto in 1891 of Japan’s first hydroelectric power plant and saw Hokuriku’s abundant rivers as a future energy source. Technical information on the subject was scarce and he had to rely on translations of papers he had obtained from General Electric of the United States. Even scarcer were Japanese engineers in Japan who had worked with electricity, so Kanaoka’s workers in the early days proceeded by trial and error. Nevertheless, a site for the first hydroelectric facility 12 kilometers south of Toyama was chosen and in 1897 the Toyama Electric Light Company was formed with an initial capitalization of ¥100,000. Using technology imported from General Electric, a 150kW generating facility capable of providing lighting for 1,500 homes was built.

The people of Toyama loved the new electric lamps and were happy to dispense with their clumsy and dangerous oil lamps. Kanaoka could not keep up with demand with only a single generator, and he had ambitious expansion plans. However, disaster struck in 1899 when a fire destroyed a large portion of Toyama City and with it the electricity distribution network. Kanaoka started again, and by 1903 had brought the company up to its previous level. Electric lighting had been introduced into Fukui prefecture by Kyoto Electric Lighting Company with the construction of the 80kW Shikununo hydroelectric power station in 1899. In 1900 the city of Kanazawa in Ishikawa prefecture set up a publicly owned company, Takaoka Electric Lighting, to provide 250 kW of hydroelectric power for the city.

As a consequence of its victory over Russia in the 1904-1905 Russo-Japanese War, Japan’s status in the world improved dramatically and trade with Southeast Asian markets increased. Hokuriku’s position on the west coast of Japan, close to Korea and China, made it an important trade route with railway being the most important form of transport. A good proportion of the early railway in the region was electric-powered and, as in Japan as a whole, the growth of electric power was enhanced by the proliferation of rail transport. In 1911 the government established the Electric Utility Industry Law. The law made it necessary to obtain permission for the production and distribution of electric power and was an attempt by the government to control the hundreds of small electric power companies springing up all over Japan. In Toyama, Kanaoka’s company was flourishing but was under increasing competition from smaller competitors.

The combined effects of World War I, the Great Kanto Earthquake in 1923, and the collapse of silk prices sent the Japanese economy into depression in the 1920s, and this caused the stagnation of demand for electric power. The power companies competed fiercely for customers and there occurred cases of up to three power companies supplying one user. The smaller utilities began to go out of business and were acquired by a group of large electric utilities known as the “Big Five.” They were dominated by Tokyo Electric Lighting and Daido Power in particular. Japan’s economic boom of the 1930s substantially improved the position of the industry. The government was gearing up for war at the time and thought it essential to have control over Japan’s power generation industry. It regulated the industry by passing four laws in 1938 that ensured state control over price, plant development, transmission, and all other aspects of the industry. In effect it had formed one of the largest electric companies in the world, with the establishment of JEGTCO (Japan Electric Generation and Transmission Company).

The Allied bombing of Japan between 1943 and 1945 seriously damaged 44% of Japan’s thermal power stations and devastated its industry. Although the Hokuriku cities of Toy-ama and Kanazawa were targeted along with Japan’s other major cities, the region was not strategically important and hence was not systematically destroyed as were Tokyo and Osaka. The GHQ, which was effectively in charge of Japan from 1945 to 1952, made sweeping changes in Japan’s electric power industry. The Council for Reorganization of Electric Utility Industry was formed in 1949 and chaired by Yasuzaemon Matsunaga, former president of Toho Electric Power Company. After much negotiation a plan was produced that divided the country into nine areas, each with its own privately owned electric power company.

Thus Hokuriku Electric Power was formed in May 1951 and Shosaku Yamada chosen by the council as its first president. His first task was similar to that of the presidents of the other regional electric utilities—the unification of Hokuriku’s power generation capacity as a single company. The company’s initial capitalization of ¥370 million was dwarfed by the total for the nine companies of ¥100 billion, which made it the smallest. In the past, for very large-scale projects, Hokuriku had entered into joint venture arrangements with other regional utilities, such as nearby Kansai, and these would continue. In the first half of the 1950s, Japan’s economy was experiencing rapid growth, and in order to meet increased capital expenditure needs Hokuriku Electric Power issued ¥740 million worth of shares and was listed on the Tokyo Stock Exchange. Along with the other utility companies in Japan, Hokuriku embarked on a promotional campaign to encourage both the general public and industry to use electricity. The opening of a customer service center in Toyama was a step toward this goal. Yamada organized the company by setting up branch offices in the three prefectures which would be responsible for customer support in their respective regions. The head office remained in Toyama, in a separate location from the Toyama prefectural office. At the time in Japan the most common method of distributing electricity in the cities was via a network of cables suspended on concrete poles running along the roadside. Hokuriku Electric Power’s demand for these poles made it financially viable for the company to set up a subsidiary to supply them, called Nihankai Concrete Industry. In 1954 two new hydroelectric power stations were completed on the Jinzu River in Toyama to give a combined output of 120,000kW. At this time there was an ongoing operation to close down the company’s redundant, small-scale plant and replace it with larger modernized facilities. The company was aided financially by grants from the central government and loans from the World Bank, including a $25 million loan obtained in 1958 after negotiations in Washington.

In the 1950s Japan was desperate to modernize and rebuild its economy, and technology and information were absorbed in large quantities from the West, mainly the United States. With help from the latter, the Japan Atomic Energy Research Institute was established in 1955 and a year later Hokuriku Electric Power set up its own nuclear power committee. Its original function was simply to gather data on the peaceful use of nuclear power with a long term view. Following a visit to several electric power companies in the United States by several senior company executives, a radio communication system was set up to connect all generating and servicing centers and an IBM mainframe computer was installed at the Toyama headquarters. Technology was also imported from Europe, with Siemens of West Germany supplying Hokuriku Electric Power with a hydroelectric station installed on Wada River in Toyama prefecture in 1957.

In 1960 a management shake-up occurred in the company with most of the main board replaced by younger managers, and Mr. Kanai became the second president of the company. The new management sought to accelerate the expansion program and ambitious construction schemes were begun, including work on the company’s 33rd power station in Toyama. By this time Hokuriku Electric Power was the leader of the business community in the region.

The 1960s were a dynamic time for Japanese industry and it was a challenge for the electric utilities to keep up with demand. The average annual growth rate during the ten years leading up to the first oil shock in 1973 was 11%. The figure for Hokuriku Electric Power was slightly lower, but still represented a significant increase in generating capacity. The widespread use of air-conditioning during the summer had shifted the time and season of peak use from winter evenings to summer days. The period also marked the increased use of oil as a source of fuel. The halving of the crude oil price between 1961 and 1971 caused its use to more than quadruple between these years in Japan as a whole. While a similar trend was seen in Hokuriku, hydroelectric power remained the single most significant energy source. In 1968 Hokuriku Electric Power’s internal nuclear power development program was boosted with the formation of a nuclear power development committee and the participation by several board members in a conference on the peaceful use of nuclear power in the United States. However, the company’s nuclear program lagged behind most of the other regional utilities, many of whom had construction under way.

Japan’s reliance on Middle Eastern oil fired thermal power stations caused the country to be badly hit by the oil shock of 1973 and profoundly changed the electric power industry. The utility companies had to cope with slumping demand and fuel conservation by the public. Furthermore they found it necessary to develop serious alternatives to oil as a fuel—mainly nuclear, gas, and coal power. A 25% decrease in net income due to drastically increased expenses, especially fuel costs, for Hokuriku Electric Power between 1973 and 1974 made it necessary for the company to seek a series of substantial loans form foreign as well as domestic banks. However, major rate revision allowances in 1974, 1976, and 1980 ensured that the company had sufficient revenues to survive. By increasing its use of coal and hydroelectric power, the company managed to reduce its dependence on oil as a fuel. Hokuriku Electric Power also procured power from Japan Atomic Power Company’s Tsuruga nuclear power station in southern Fukui prefecture. Growth in the Japanese economy slowed in the 1980s and there was an increasing shift away from the traditional heavy chemical industries to the service and high technology sectors which tend to use less power. Hokuriku Electric Power responded to these changes by increasing marketing aimed at public consumers and increasing efficiency through improved technology. Personnel costs were cut significantly by the automation of the distribution of electricity. So-called ELEAM houses, all-electric model homes, were exhibited at the regional sales offices.

In terms of diversification, the main feature of Hokuriku Electric Power’s immediate plans is the completion of the 540,000kW Shika Nuclear Power Station in northern Ishikawa. It will be, according to the company, one of the safest and most environmentally friendly stations in the world. On the management side, the company stated its “Fundamental Business Policy” in 1988, targeting the pursuit of cost reduction, community revitalization, increased marketing efforts, and establishment of better relations with customers.