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Power companies must heed shareholder proposals from local governments |
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Japan
The nine electric power companies that operate nuclear power plants will hold their annual shareholders meetings on June 27.
Those of Kansai Electric Power Co. and Tokyo Electric Power Co. are drawing much attention because some local governments that hold shares in the utilities are demanding a greater say in their management and policies. Toru Hashimoto, the mayor of Osaka city, is among those local government heads who will attend the meetings to explain their ideas. Osaka city is KEPCO's largest shareholder.
The meetings offer a precious opportunity for the representatives of areas that are big users of electricity to directly express their views to top executives of the utilities about the way the firms are managed. Clearly, the companies need to ensure that serious and constructive debate takes place rather than simply advancing the proceedings in a mechanical way.
The cities of Osaka, Kobe and Kyoto have proposed that KEPCO stop providing electricity generated by nuclear power.
Osaka is urging the utility to change its Articles of Incorporation to commit itself to closing down all its nuclear power plants as soon as possible. In similar proposals, Kyoto and Kobe say the company should pledge in the document to establish a "sustainable power supply system that is not dependent on nuclear power generation."
In notices of the annual shareholders meeting sent out to shareholders, the utility expressed its opposition to these proposals. Japan's energy self-sufficiency rate is just 4 percent. The company argues that Japan will be left vulnerable if it becomes too dependent on fossil fuels.
The financial institutions that together own 30 percent of the utility are also expected to oppose the proposals. This is because the company would keep losing money if it closed its nuclear power plants, causing it to cut its dividends.
But the proposals from local government chiefs who represent more than 4 million voters in the three cities carry considerable weight.
The utility should realize that public opinion is forcefully pushing for a shift in its management strategy toward a society that is not dependent on nuclear energy. If it diversified its power sources, KEPCO would be in a position to strengthen its mid- and long-term management, thereby serving the interests of its shareholders.
The three Kansai cities have also jointly proposed measures to inject greater transparency into the utility’s management. This includes disclosure of individual board members' salaries. They are also calling on the company to separate its power generation and transmission operations. All these arguments are based on the viewpoint of electricity users.
Irrespective of whether the ideas are approved at the meeting, KEPCO has a duty to pay serious attention to the proposals and opinions that are presented.
Institutional investors that are opposed to the proposals should be aware that their actions are being closely watched by the public.
TEPCO's shareholders meeting will be attended by Naoki Inose, vice governor of Tokyo.
Inose has been behind the metropolitan government's move to reduce its reliance on the utility. He has cited TEPCO's "family companies" as a problem in relation to its planned rate hikes and asked Chubu Electric Power Co. to supply power to the capital.
The metropolitan government has announced four proposals for the meeting and is urging other shareholders to support them. One calls on TEPCO to describe its commitment to the principle of giving priority to "customer services" as a general rule.
The Tokyo metropolitan government's proposals are likely to be rejected. But the central government, which wants to place TEPCO under state control and push through necessary reforms from the inside, has a clear interest in not antagonizing the metropolitan government.
Since last year's disaster at the Fukushima No. 1 nuclear power plant, people have become increasingly skeptical about safety measures implemented by utilities and their supply-demand estimates across the nation. The shareholders meetings should be a starting point to reform the management and operations of the electric power companies.--The Asahi Shimbun, June 26
The Asahi Shimbun AJW
26 June 2012
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