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Government to reform TEPCO?

May 10, 2012



Editorial: Gov't should fulfill responsibility for rehabilitation of TEPCO



The Japanese government is urged to fulfill its responsibility for the rehabilitation of the troubled Tokyo Electric Power Co. (TEPCO), which it has placed under its control.

Economy, Trade and Industry Minister Yukio Edano on May 9 approved a rehabilitation plan worked out by TEPCO, the operator of the tsunami-hit Fukushima No. 1 Nuclear Power Plant. Under the proposal, the government will provide TEPCO with an infusion of approximately 1 trillion yen in public funds through its purchase of TEPCO shares.

The infusion will bring the total amount of public funds provided to TEPCO to some 3.5 trillion yen, which includes those for the payment of compensation to victims of the nuclear disaster.

Such a huge amount of financial assistance from the government is aimed at helping TEPCO fulfill its responsibility for paying compensation to victims, ending the nuclear disaster and ensuring a stable supply of electric power. If the assistance fails to achieve a turnaround, the government will be forced to extend additional financial assistance to the firm. TEPCO is now under pressure to quickly rehabilitate itself.

The rehabilitation plan aims to turn TEPCO into the black in the business year ending March 31, 2014. However, the implementation of the plan will likely face setbacks because it is based on the principle that TEPCO will raise electricity fares for households and reactivate its Kashiwazaki-Kariwa Nuclear Power Plant.

TEPCO needs to thoroughly streamline its management by drastically reorganizing its affiliated firms and slashing retirees' corporate pension benefits. Reforming its dogmatic corporate culture is also an urgent task for TEPCO, which has clung to its regional monopoly and insists that it has the right to raise electricity charges.

Under the plan, TEPCO will appoint a majority of its board members from outside the firm and set up a management reform task force comprised of younger and mid-ranking employees as well as those of the Nuclear Damage Liability Facilitation Fund.

Managing director Naomi Hirose, who is set to assume the presidency of TEPCO, said he will play a leading role in reforming the utility. "I'll take the lead in our efforts to convince the public as soon as possible that TEPCO has changed."

TEPCO also faces hurdles in reactivating its nuclear power plants that have been suspended for regular inspections.

The general public is filled with a sense of distrust in not only TEPCO that has caused the nuclear disaster but also the government's nuclear power policy and standards for the safety of nuclear plants. While the government is authorized to decide whether to permit power suppliers to resume operations at their nuclear power stations, it also will be in a position to apply for such permission as the largest shareholder in TEPCO. Therefore, the government is required to provide a more convincing explanation if it grants TEPCO permission to reactivate its nuclear power stations.

First of all, the government should set up a planned new nuclear power regulatory agency as soon as possible and work out new safety standards for nuclear power stations based on the results of its investigation into the Fukushima disaster. Unless it explains the need for the resumption of operations at nuclear plants and the safety of such power stations based on such efforts, the government is highly unlikely to win the public's understanding.

Furthermore, the government needs to clarify its policy goal of getting rid of all nuclear plants in the future and show specific measures to achieve this in efforts to convince the general public.

The costs of decommissioning the crippled nuclear plant and decontaminating areas tainted with radioactive substances from the power station still cannot be estimated. In this sense, the latest TEPCO rehabilitation plan is merely a provisional one. The plan points to the possibility of the government extending additional assistance to the utility, showing that no optimism is warranted about the prospects of TEPCO's rehabilitation.

Unless the rehabilitation of the utility progresses steadily, it will only increase the financial burden on taxpayers. Both TEPCO and the government, which has injected a massive amount of taxpayers' money into TEPCO to place the utility under its control, must be aware of the weight of their responsibility for the rehabilitation of the power supplier.

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