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Friday, Aug. 17, 2012
Tepco's shaky revival plan
The government on July 31 injected ¥1 trillion into Tokyo Electric Power Co., virtually nationalizing the utility, which was teetering in the wake of the nuclear crisis at its Fukushima No. 1 nuclear power plant.
Now that Tepco has avoided bankruptcy thanks to the injection of public money and received government approval to raise the prices of electricity for households, it must shed its bureaucratic mindset and its traditional corporate culture, characterized by arrogance toward consumers, and make its operations transparent.
In compensating nuclear disaster victims, Tepco should not delay the processing of compensation claims because of differences with them over minor points.
In addition to the government's capital injection, which has enabled it to acquire a majority of Tepco voting shares, banks provided ¥370 billion in loans to Tepco on Aug. 1. But Tepco is still in a desperate financial situation.
For example, the costs for decommissioning the Fukushima No. 1 nuclear power plant and removing radioactive materials from contaminated areas are putting great pressure on the company. The possibility cannot be ruled out that the costs will swell to several trillion yen.
As Tepco President Naomi Hirose said in reference to the government capital injection and the bank loans, "Tepco has been presented with a last chance by the people."
In the April-June period, Tepco suffered a net loss of ¥288.3 billion on a consolidated basis. It revised the expected net loss for the business year that began in April from ¥100 billion to ¥160 billion. In the three-month period, the fuel cost for thermal power plants, which have been substituting for offline nuclear power plants, shot up 54.3 percent to ¥624.6 billion.
The main pillars of Tepco's special business operation plan for its reconstruction consist of raising electricity prices for households by an average 8.46 percent from Sept. 1 and restarting in phases the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture from April 2013.
Although the operation of each reactor at the plant is expected to reduce Tepco's total costs by ¥80 billion a year, the prospects of restarting the Kashiwazaki-Kariwa plant, which has seven reactors, is dim.
Clearly Tepco's reconstruction plan is on shaky ground. The government at least has taken the position that Japan's reliance on nuclear power should be reduced. The voice for ending such reliance is strong among the Japanese.
If the government and Tepco try to go ahead with the plan to restart the Kashiwazaki-Kariwa plant, they will face strong opposition from local governments concerned and people opposed to nuclear power.