The Tokyo Electric Power Company

views updated

The Tokyo Electric Power Company

1-3, Uchisaiwai-cho, 1-chome
Chiyoda-ku, Tokyo 100-8560
Japan Telephone: (+03) 4216-1111
Fax: (+03) 4216-2539
Web site: http://www.tepco.co.jp

Public Company
Incorporated: 1951
Employees: 51,694
Sales: ¥5.05 trillion ($45.9 billion) (2004)
Stock Exchanges: Tokyo Osaka Nagoya Niigata
Ticker Symbol: TKECF

NAIC: 221111 Hydroelectric Power Generation; 221112 Fossil Fuel Electric Power Generation; 221113 Nuclear Electric Power Generation; 221119 Other Electric Power Generation; 221121 Electric Bulk Power Transmission and Control; 221122 Electric Power Distribution

The Tokyo Electric Power Company (TEPCO) is one of the world's largest electric utility companies. Japan has ten major regional power companies but TEPCO alone supplies approximately one-third of Japan's electricity. In fiscal year 2004, the company distributed 286.7 billion kilowatt-hours (kWh) of electricity to 28 million industrial, commercial, and individual customers in Tokyo and the surrounding area. TEPCO's total generating capacity is nearly 63,000 megawatts (MW). It has 190 thermal, nuclear, hydro, and wind power plants in its arsenal. Deregulation of Japan's electric market began in 1995 and since that time TEPCO has been diversifying its holdings. The company is also working to restore public faith in nuclear power after a scandal in 2002 forced the temporary shutdown of its 17 nuclear power plants.

Early History

TEPCO has its roots in Japan's first electric utility, Tokyo Electric Lighting Company, which emerged in the mid-1880s, although TEPCO 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 2,390 kW. Distribution efficiency improved in 1907 with 55 kilovolts (kV) transmission. By 1911, the company was also making tungsten bulbs.

Industry Law Takes Effect in 1911

The government consolidated ad hoc legislation over the rapidly growing industry by enacting an Electric Utility Industry Law in 1911. 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 to 1895 boosted Japanese industry with its procurement demands. At the same time, tramcar systems proliferated in Tokyo and other Japanese cities.

Following the 1904 to 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 with 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 among Japanese companies importing American equipment which produced current at 50 hertz (Hz). Companies in western Japan, including Osaka, had opted for German equipment, delivering 60Hz. New transmission technology could deliver and convert hydroelectric power from the hinter-land 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.

State Control in the Late 1930s and Early 1940s

By 1937, governments increasingly dominated by personalities wanting to emulate the German and Italian imperialist regimes 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, and Tokyo and most of eastern Japan was standardized on 50Hz current while western Japan used 60Hz. At the same time, military intervention had, in fact, slowed down development in the utility industry. In the four years before World War II, electricity production capacity had been increasing at an annual rate of 600 MW. During the war years, annual growth in capacity declined to an average 170 MW.

Postwar Occupation

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 percent 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 percent and rose by an average of 10 percent for the next several years.

Company Perspectives:

Our group management principle is to contribute to the realization of affluent living and a pleasant environment by offering optimal energy services. The TEPCO group promotes this management principle, and strives to become the top energy service provider in line with the following three group management guidelines: win the trust of society; survive the struggle in competition; and foster people and technologies.

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 such as the zaibatsu. Just how this was to be accomplished became a heated issue between the Japanese leaders and the Allied occupation planners, who debated whether centralized state control should continue or 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: to support 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 he retired to private life. In the postwar debate over future policy, he championed the private enterprise solution and his views prevailed.

TEPCO Begins Operation in 1951

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 percent 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 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 cash flow 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. At an early stage, TEPCO management gave priority to developing a new generation of managerial talent. In-house training courses reached the level of university education. State planning continued to have a role, especially for ensuring stability of supply for something as crucial as energy.

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 less expensive.

Key Dates:

1886:: Tokyo Electric Lighting Company is granted a charter to generate and distribute electricity and sell lighting accessories.
1911:: The Electric Utility Industry Law is enacted.
1938:: Tokyo Electric Lighting Company comes under state control.
1951:: TEPCO incorporates as the Japanese electric power industry returns to private ownership.
1955:: TEPCO research laboratories begin exploring nuclear power.
1966:: Pilot nuclear power plants begin operating in Japan.
1970:: The Minami-Yokohama Thermal Power Station becomes the first in the world to use liquefied natural gas (LNG) from Alaska.
1989:: TEPCO cable television system is established.
1995:: Changes in the Electricity Utilities Industry Law allow competition to enter into the electricity generation and supply market.
2000:: The retail sector of Japan's electric power industry begins to deregulate.
2002:: The company is forced to temporarily close its 17 nuclear reactors.
2005:: The retail electric power market continues to deregulate.

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 eastern and western 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 Japan's economy experienced at this time. He had studied economics at Tokyo Imperial University and 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. By then, however, 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 Japanese life in general. It eventually became 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.

Exploring New Sources of Power: 1960s–1980s

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 metal 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.

With the expansion of the coal-burning utility industry in Japan, air pollution began to reach 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 that could result in catastrophic events at nuclear power facilities, 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 to 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 percent to 21 percent. 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 percent to 56 percent. 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 was 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 delayed but did not halt the development of nuclear power. TEPCO and the government emphasized a net gain in combating conventional pollution, 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 in the Early to Mid-1990s

At this time, TEPCO imported uranium ores from the United States, Canada, Australia, and Niger. Specialized processing was carried out in the United States, Canada, the United Kingdom, and France, and spent nuclear fuel was sent to the United Kingdom and France for reprocessing. (By 2001, spent nuclear fuel was no longer shipped abroad.) Both uranium enrichment and spent-fuel reprocessing started to be carried out in Japan, however, and nuclear power stations added repositories for low-level wastes. In 1991, nuclear power accounted for 28 percent of TEPCO's total generation. This was projected to reach 39 percent by the year 2000.

TEPCO fully considered national policy needs in its business decisions. Since the 1970s, the main contractors for its nuclear power plants had 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 liquified petroleum gas). The LNG share in TEPCO's thermal power fuel mix increased from 10 percent in 1973 to 56 percent in 1991. TEPCO bought 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 percent of TEPCO's total generating facilities in 1970 to 21 percent in 1990, and was projected to shrink to 15 percent by 2000 even before the Gulf War provoked new concern about supply stability. Hydroelectric power, representing 88 percent of supply in 1952, the company's first full year of operation, leveled off at around 9 percent; it survives for peak load demand fluctuations in a strategy of nuclear power for "base load" and LNG for "middle load." Coal was returned to the list of fuels in less-polluting guises, partly because the new technologies made it possible to begin buying American and other coals as well as Australian coal as a trade-balancing measure.

TEPCO was 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 was 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 maximized the application of its technology and expertise wherever opportunity beckoned.

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 was also being applied to prototype high-rise buildings which could adjust to withstand earthquake vibrations. This was a contribution to Tokyo's major waterfront urban redevelopment projects. In seeking to reduce peak demand, TEPCO technologies gave Tokyo its first district air-conditioning system using waste heat on the heat-pump principle. In some cases, the heat was extracted from river waters warmed by factory discharge, while in others heat was recovered from sewage beneath high-rise "new towns." TEPCO recycled 60 percent of the copper used in power lines. TEPCO's laboratories were researching high-temperature industrial ceramics, superconductivity, and artificial intelligence for computers.

During the 1990s, TEPCO was involved with major international research projects in the United States and Europe while encouraging visits from overseas students and scientists. TEPCO technology enabled the company to achieve the world's lowest levels of sulfur dioxide and carbon dioxide emissions. In addition, research revealed the photosynthesis potential of seaweed for absorbing carbon dioxide. At the 1991 Tokyo Auto Show, TEPCO displayed an electric car prototype that could reach 170 kilometers per hour and could drive the 500 kilometers to Osaka without a battery recharge. Because of these wide-ranging activities, the company began to refer to itself as the TEPCO Group. It entered international capital markets with the issue of corporate bonds.

Challenges in the Late 1990s and Beyond

During the 1990s, the electricity industry in Japan began its deregulation process. In 1995, changes in the Electricity Utilities Industry Law allowed competition to enter into the electricity generation and supply market. Then, in 1996, a wholesale electric power bidding system enabled non-electric power companies to sell electricity to electric power companies. In March 2000, retail sales of electricity were partially deregulated, allowing large-lot customers—those demanding large amounts of electricity—to choose their power supplier. The retail sector continued the deregulation process in April 2005. This sector of the industry accounted for nearly 60 percent of TEPCO's electricity sales.

The intent of deregulation was to foster competition, which in turn would lower the electricity costs in the country. The deregulation was slow to change the Japanese industry, however, and during 2001 TEPCO and the other regional companies still controlled 99 percent of the market. In fact, only six Japanese-based companies, other than the original ten, supplied power to large customers, including retail businesses and office buildings. This accounted for a mere 0.2 percent share of the overall utility market.

During Japan's deregulation process, the nation as a whole was suffering due to an economic downturn. Demand for electric power fell, leaving TEPCO focused on developing new sources of income and revenue. In 1997, the company became Japan's first electric concern to sell LNG. In addition, it stepped into the Internet service provider arena when it partnered with several U.S. firms to create SpeedNet. Telecommunications firm POWEREDCOM was also launched at this time in partnership with other Japanese electric firms. In 2001, the company announced plans to construct Vietnam's first independent power plant.

TEPCO completed construction on the largest nuclear plant in the world in 1997. This was achieved despite public sentiment in Japan, which remained hostile towards the development of nuclear power due to several fatal accidents and scandals. According to a March 2000 Business Week article, nuclear power accounted for nearly 35 percent of Japan's electricity. In fact, for much of the 1990s, Japan's industry had aggressively focused on shifting from expensive and polluting coal-fired plants to nuclear power. Due to concerns over the safety of these nuclear facilities, Japan's government was forced to rethink its expansion efforts, cut back on its nuclear development plans, and find alternative sources of power. Nevertheless, it hoped nuclear power would be supplying over 40 percent of Japan's energy needs by 2011.

Despite public opposition to nuclear power, TEPCO continued to promote it as an environmentally friendly form of energy. Disaster struck in 2002, however, after the company admitted to falsifying safety documents related to its nuclear facilities. Engineers had failed to report 29 incidents of serious leaks and cracks in reactors at three of its nuclear plants during the late 1980s and 1990s. As a consequence of these revelations, the Japanese government ordered the temporary shutdown of TEPCO's 17 nuclear facilities. This left Tokyo in the midst of a power shortage during the hot summer months. Three of its plants were allowed to restart by 2003, and the remaining facilities were back online by the end of 2004.

The scandal proved costly to TEPCO, affecting its bottom line by ¥2 billion, as well as to its customers and the industry as a whole. During the shutdown, replacement power cost nearly 50 percent more than nuclear power, leaving its customers footing a much larger bill. At the same time, trust in Japan's nuclear energy facilities and the companies that supplied nuclear power was shaky at best. The government hoped to regain consumer confidence, especially since nuclear power remained at the forefront of the country's energy strategy.

During 2004, TEPCO launched a new management plan entitled Management Vision 2010. A cornerstone in this new strategy was shoring up faith in the company's nuclear program. The company also focused on overcoming competition brought on by deregulation, developing new technologies, and expanding into new business areas. With the nuclear scandal behind it, TEPCO looked to the future and was determined to restore its image as low-cost, high-quality electric power supplier.

Principal Subsidiaries

The Tokyo Electric Generation Company Ltd.; POWEREDCOM Inc. (83.8%); AT TOKYO Corp. (52%); TEPCO Cable Television Inc. (85.4%); TEPCO Systems Corporation; Toden Real Estate Co Inc.; Toshin Building Co. Ltd.; Toden Kogyo Co. Ltd.; Tokyo TOSHI Service Company; Tokyo Electric Power Environmental Engineering Company Inc.; Tokyo Electric Power Home Service Company Ltd.; Tokyo Densetsu Service Co. Ltd.; Tokyo Living Service Co. Ltd.; Tokyo Electric Power Services Co. Ltd.; Toden Kokoku Co. Ltd. (80.2%); Tokyo Electric Power Company International B.V.; Pacific LNG Shipping Ltd. (70%).