More money from Gov't for the Nuclear Damage Liability Facilitation Fund (NDF)

November 9, 2013

Nuke crisis compensation fund to get capital boost, expanded responsibilities

http://mainichi.jp/english/english/newsselect/news/20131109p2a00m0na009000c.html

The government is planning to inject as much as 5 trillion yen in additional capital into the Nuclear Damage Liability Facilitation Fund (NDF) and transforming the compensation body into a funding portal for a broad array of nuclear crisis-related costs, it was learned on Nov. 8.

Under the proposal, designed to increase the monies available for compensation and decontamination included in an "accelerated Fukushima disaster recovery" plan now under consideration by the government and ruling parties, the maximum public funding available to the NDF would jump from the present 5 trillion yen to 8-10 trillion yen.

Using 5 trillion yen worth of interest-free loans that the government issued to the NDF, the fund is currently loaning funds to Fukushima No. 1 nuclear plant operator Tokyo Electric Power Co. (TEPCO), primarily as a capital base to pay disaster compensation. The NDF is supposed to ask the government to exchange bonds for cash to extend loans to TEPCO.

Both compensation payments and decontamination costs, however, are now expected to cost significantly more than had originally been estimated, and the government is set to allow TEPCO to broaden its use of NDF loans to cover cleanup and other disaster-related costs. In turn, the government plans to issue more interest-free bonds to the NDF to bring up its funding.

The government is furthermore considering including expanded compensation for Fukushima residents affected by the nuclear crisis in the accelerated recovery bill. The increase would be intended to guarantee sufficient support funding for both residents moving quickly back into areas evacuated in the wake of the plant meltdowns, and the relocation costs of residents of badly contaminated "difficult to return" areas. These compensation payments were originally expected to total some 3.8 trillion yen, but many expect that figure to rise to 5-6 trillion yen.

The government also plans to provide the estimated 2 trillion yen-plus for decontamination via the NDF. The government is covering the cleanup costs for the time being and will demand to be reimbursed by TEPCO later -- a setup designed to prevent the near-term concentration of the decontamination costs from plunging the utility in a state of capital deficit.

Related to the cleanup operations, the government is also considering channeling funds through the NDF to support creating mid-term storage sites for contaminated soil. Building the sites is expected to cost about 1 trillion yen, which would be drawn from proceeds of an increased "new power source development" tax levied on electricity bills.

Collecting the funds within a short period, however, could cause power bills to spike, prompting the move to use NDF capital to cover disposal site construction in the short-term. The funds would then be recovered over many years from power source development tax receipts.

All this extra capital for the NDF will require the government to issue 3-5 trillion yen more in interest-free bonds to the NDF, though this figure will remain uncertain as long as the total cost of decontamination is unknown. A concrete estimate of the cleanup costs is likely to be long in coming, and the government is considering boosting debt issuances in stages as required.

Broadly speaking, the nuclear disaster response policy funnels funds to TEPCO in the form of government loans via the NDF, which the government would then recover over the long-term -- ultimately placing the burden of cleanup and recovery on TEPCO and the electric power industry as a whole. In concrete terms, the NDF will repay the debts to the government using general contributions paid by the 11 nuclear power producers in Japan and special contributions extended by TEPCO.