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Thursday, May 10, 2012
Restructuring of Tepco
Trade and industry minister Yukio Edano Wednesday approved a 10-year comprehensive business plan which Tokyo Electric Power Co. and the government-backed Nuclear Damage Liability Facilitation Fund on April 27 submitted to the government for restructuring the power company in the wake of the nuclear crisis at its Fukushima No. 1 nuclear power plant.
Through the fund, ¥1 trillion will be injected into Tepco in July at the earliest. The money will be used to compensate victims of the nuclear accident. The government will also acquire more than 50 percent of Tepco's voting shares to lead its reform. But even with these measures, there is no guarantee that Tepco's reconstruction will be carried out smoothly.
The ¥1 trillion will not be enough to cover compensation costs. The business plan envisages saving more than ¥3 trillion over 10 years through such means as wage cuts and asset sales. The saved money will also be used for compensation. In addition to the compensation, Tepco will face the difficult tasks of decontaminating areas exposed to radioactive materials from the Fukushima plant, and decommissioning the plant.
The business plan is based on two assumptions: One is a 10 percent increase in electricity fees for households for three years from July; the other is the restart of the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture within fiscal 2013. These measures will face strong public criticism.
In late December, Tepco President Toshio Nishizawa caused a furor when he said Tepco has the right to raise electricity fees. People perceived an arrogant attitude that they won't forget. They won't accept the proposed fee hike unless the current system of automatically including a company profit margin is reformed. Mr. Nishizawa will be replaced by Mr. Naomi Hirose, managing director in charge of compensation for Fukushima nuclear accident victims.
Tepco plans to restart the Kashiwazaki-Kariwa nuclear power plant, although full studies of the Fukushima nuclear accidents have not yet been carried out and new safety standards for nuclear power plants based on such studies have not yet been established. Therefore, local governments are likely to oppose the restart plan.
The government needs to prevail on Tepco and other power companies to end their arrogance. It should take steps to encourage the entry of new firms into power generation to increase competition while ensuring stable power supplies.