Tohoku Electric Power Company, Inc.

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Tohoku Electric Power Company, Inc.

3-7-1 Ichibancho
Aoba-ku
Sendai 980
Japan
(022) 225 2111
Fax: (022) 221 1917

Public Company
Incorporated: 1951
Employees: 13,745
Sales: ¥1.16 trillion (US$9.29 billion)
Stock Exchanges: Tokyo Osaka

Tohoku Electric Power Company, Inc. (Tohoku Electric Power) serves nearly five million residences and one million commercial and industrial customers in the Tohoku region, which comprises the seven northernmost prefectures of Japan’s main island of Honshu. The region contains 20% of Japan’s land and 10% of its population, but accounts for only 6% of its GNP. With its mountainous landscape and heavy winter snow, Tohoku has lagged behind the rest of Japan in terms of industrial development. The region is still largely rural and is known as Japan’s furusato or country home. However, the city of Sendai in Miyagi prefecture has boomed in recent years to rival the southern Japanese centers. Tohoku’s climate and the inaccessibility of many parts of the region has presented Tohoku Electric Power with special problems.

Tohoku Electric Power was formed as a company on May 1, 1951 when the General Headquarters of the Allied Powers (GHQ) under General MacArthur approved a plan submitted by the Japanese government to reorganize and rationalize the electrical power industry. Under the scheme the nation was divided into nine blocks, each with its own privately-owned electric power company. At the time of inauguration, the nine companies served 16 million customers with a combined capacity of 8,500 megawatts (MW).

The history of electric power in Japan as a whole, however, 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 was established in 1886, seven years after Thomas Edison had invented the incandescent lamp in the United States. The company was Tokyo Electric Lighting Company and its and Japan’s first electric power plant was completed in 1887 as a 25 kilowatt (KW) facility in Nihon-bashi, Tokyo. Throughout its history Japan has always assimilated and improved upon outside technology and ideas, and electric power was no exception. After the opening of Tokyo Electric Lighting many electric utilities started up in main cities. One of the first hydroelectric plants to open in Japan was Sankyozawa Power Station, operated by Fukushima Electric Lighting, in 1899. This facility was the first of numerous generating sites to be constructed in Tohoku, thus providing the foundation of what was eventually to become Tohoku Electric Power. Coming only 17 years after the world’s first hydroelectric facility in Wisconsin in the United States and transmitting electric power at 11 thousand volts over a distance of 25 kilometers, this was a remarkable achievement. As in the West, the very early Japanese power stations were constructed close to where the power was required due to the primitive transmission techniques available at that time. An example of this was the hydroelectric power plant built in the Kosaka mine works in the northern Tohoku prefecture of Akita in 1903. The plant was the brainchild of the chief electrical engineer at the mine, Namihei Odaira. Odaira was later to found Hitachi Co. Ltd. and remained the dominant figure in the development of Japan’s electrical industry.

Although demand had increased rapidly, the use of electricity was generally limited to government and commercial offices and factories. In Tohoku, where hydroelectric power was the main source of electricity, it was not until about 1910 that technological advances allowed the output of hydroelectric stations to be as efficient and effective as conventional thermal coal- and oil-powered stations. In 1915 the Iwamuro station in Fukushima, Tohoku accomplished the long-distance transmission of 115,000 voltage power to Tokyo 220 kilometers away. The significance of the event was not only that the transmission line was the third longest in the world at the time, but also that the turbines were produced in Japan by Odaira who by then had started manufacturing under the name of Hitachi.

The relatively high price of electricity also held growth in check. A large proportion of the demand for electricity came from the electric railways that were springing up all over the country. Japan fought three wars between the years 1894 and 1918: the Sino-Japanese War, won by Japan in 1894; the Russo-Japanese War, won by Japan in 1905; and World War I, where Japan was on the losing side. These wars had the effect of spurring industrial development. In 1911 the government promulgated the Electric Utility Industry Law. It provided government permission for the production and distribution of electric power. By 1920 there were 3,000 power companies in Japan riding on Japan’s economic boom. The period 1926 to 1937 can be characterized as the era of the “Big Five” in the history of electric power in Japan. It was dominated by Tokyo Electric Lighting and Daido Power in particular. Many of the companies in operation in Tohoku, such as Inawashiro Hydroelectric Power Company, were subsidiaries of the Big Five. The government regulated the industry by passing four laws in 1938 which 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 in 1943 to 1945 seriously damaged 44% of Japan’s power stations and devastated its industry. The GHQ, which effectively was 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.

One of these nine companies was Tohoku Electric Power, which was formed to consolidate the existing power generating concerns in the seven northernmost prefectures of Honshu. With start-up capital of ¥900 million, equivalent to US$2.5 million at the time, and under the leadership of President Uchiyama, the company was launched. With the area’s abundance of snowcapped mountains and rivers, the vast majority of the region’s electricity-generating facilities were hydroelectric-powered and hence located in sometimes inaccessible regions. Traditionally, the supply of electric power in the region had been somewhat unreliable. In 1945 Tohoku and all the electric power distribution systems on Honshu were standardized onto a 50 Hertz (Hz) system which helped alleviate the problem. Along with chairman Jiro Shirasu, Uchiyama had three priorities in running the company. The first was to ensure that the customer’s needs were satisfied. He also stressed the need to accommodate the 16,000 employees for whom he was now responsible, and to ensure their wellbeing. As a private concern, he strove to make Tohoku Electric Power attractive to both its existing and prospective shareholders. To achieve the first of these objectives, the management set about reorganizing the company and developing a corporate identity. Localized sales offices were developed and the number and quality of maintenance staff increased. Ambitious construction work began on hydroelectric facilities surrounding Tadami River in Fukushima Prefecture to modernize and expand on the region’s existing facilities. At the same time priority was given to the development of thermal stations within the Tohoku region. The reliability of hydroelectric power depends to some extent on precipitation levels, and less-than-average precipitation can result in power shortages. This, coupled with falling costs of thermal power generation, resulted in the latter’s increased use. By the early 1990s Tohoku Electric Power had 12 thermal installations, responsible for more than 70% of output.

In 1959, in order to coordinate the nine electric power companies, the Central Electric Power Council was established. Its first task was to facilitate the exchange of power by linking all the systems together. Its first link joined Tohoku Electric Power’s generating capability with that of Tokyo Electric Power via the Tadami Line. The 1960s in Japan were a time of double-digit economic growth and all of the EPCs, including Tohoku, experienced annual growth in demand of more than 10%. Large-scale oil-fired power stations were central to meeting Japan’s energy needs during this expansionary period, and Tohoku Electric Power invested heavily in facilities such as the Shinsendai Thermal Unit. By 1973 oil-fired thermal power accounted for over half the company’s output. A law passed in 1965 by the Japanese parliament, the Electric Utility Industry Law, was concerned with safety aspects of new facilities. A further law, passed in 1967, was concerned with pollution control. Tohoku Electric Power responded to these by drawing up strict environmental guidelines, and today is known as one of the most environmentally conscious companies in Japan. The oil shocks of 1973 and 1978 profoundly affected Japan’s economy. As a direct buyer of large amounts of Middle Eastern oil, Tohoku Electric Power had to cope with the higher price of fuel as well as the corresponding sharp drop in consumer and industrial demand for electricity. A government campaign urging energy conservation in 1973 had been very successful, and resulted in a sharp drop in the EPCs’ profits. In the short term this affected the growth of Tohoku Electric Power, and the company was forced to develop alternatives to oil-based energy sources. One possible solution lay in increased development of hydroelectric power, but the majority of efficient sources had been tapped. Tohoku and the other electric utilities began the development of Japan’s nuclear energy program. Via this and the increased use of LNG (liquid natural gas), Tohoku Electric Power halved its dependence on oil between 1973 and 1985. A 524,000 kilowatt (kW) nuclear facility was commissioned in the 1980s in Onagawa, north of Sendai, and in the early 1990s this plant alone provided 5% of the region’s electricity. There were plans to build an adjacent facility by 1996 with a capacity of almost a million kilowatts.

In 1987 the management, under current president Terayuki Akema, launched the Basic Business Development Strategy for the 21st Century. The first year was spent restructuring the main office and sales force, which had become bureaucratic and inefficient. Akema felt that the main challenge facing the company was to remain at the leading edge of technology in the industry, and that a highly efficient work force was necessary. In 1990 a research and development facility was opened in Sendai dealing with new energy sources and environmentally-oriented innovations. Students from developing countries in Asia came to Tohoku in 1989 for the first Electric Power Development Planning Course, and exchange programs were initiated with power companies in the United States. Another feature of Akema’s plan was to develop business in new areas. In 1990 Tohoku Cellular Telephone began selling cellular telephones and ELTAS Tohoku, established in 1989, offered real estate services and advertising. The success of Tohoku Electric Power in these non-core activities remains to be seen.

In terms of technological advances, Tohoku Electric Power is a leader among the Japanese utilities and in 1989 introduced an automated transmission monitoring system to iron out peaks and troughs in demand, thus making substantial savings. A fleet of helicopters constantly monitors transmission lines in the rugged Tohoku mountains, ensuring speedy repair. The booming regional economy of Tohoku in the 1990s has meant that its electricity utility is experiencing higher-than-average growth as a utility company. The challenge now for Tohoku Electric Power is to develop the necessary non-oil energy sources for electricity in order to achieve long-term stability.

Principal Subsidiaries

Yuatech Company (33%); North Japan Electric Transmission (60%); United Insulation (91%); East Japan Heavy Industries; Tohoku Cement (67%); Towa Kyodo Thermal Power (49%); Todo Heavy Industry; Tsukyu Electrical Engineering (82%); Tohoku Electrical Products (50%); Ryukawa Hydroelectric Power (50%); Tohoku Electrical Development; Tohoku Electrical Goods (69%); Tohoku Transmission (30%); Shuda Kyodo Thermal Power; Japan Sea LNG (41%); Tohoku Port Service (60%); Tohoku Land Development; Gunma Kyodo Thermal Power (50%); Indonesia LNG (60%); Tohoku Development Consultants (20%); Electric Power Life Create Company; Tohoku Information Network Services (38%); Tohoku Cellular Phone (20%); Eltas Tohoku (89%); Tohoku Air Service; Tohoku Electrical Appliance Centre; Tohoku OE Services (90%).