Tokyo, Chubu Power Price Hit Multi-Year High as Fuel Costs Climb

(Bloomberg) -- Japan’s spot power prices surged at the weekend, with elevated fuel costs driving rates in major electricity-consuming regions Tokyo and Chubu to multi-year highs.

The next-day spot power price for the Tokyo and Chubu areas, climbed 1.1% and 7.2% on a weekly basis to ¥36.11 ($0.2)/kWh and ¥36.29/kWh respectively on Sunday, the highest since September 2022, according to data from Japan Electric Power Exchange. Meanwhile, the nationwide average price was down 8.7% to ¥30.09/kWh on the same day.

Spot liquefied natural gas prices extended gains to about $34 per million British thermal units on Friday, according to traders, more than triple pre-war levels. LNG flows through the Strait of Hormuz — a key waterway for global exports — remain at less than a third of the rate before the conflict began.

Average household electricity bills in the Tokyo area are projected to reach a record ¥9,738 in November, driven by rising fuel costs stemming from the conflict in the Middle East. The bill could soon top ¥10,000 if the current surge in power prices continues, said Hiroyuki Yamaguchi, Executive Vice President of Tokyo Electric Power Co. during an earnings briefing on Friday.

Japan’s fuel-cost adjustment system automatically reflects changes in LNG, crude oil and coal import prices in electricity rates, based on a three-month average. 

Tensions in the Middle East have escalated since a Pakistani LNG carrier was attacked near the Strait of Hormuz on Friday. This could signal a further prolonging of the waterway’s effective closure, potentially driving fuel costs even higher and adding to pressure on Japanese utilities.

--With assistance from Stephen Stapczynski.

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