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Monday, Sep. 26, 2011

SENTAKU MAGAZINE

Time favors Tepco rebound

As the crisis at Tokyo Electric Power Co.'s stricken Fukushima No. 1 nuclear power station continues, there has been a mounting call in Japan to eliminate or reduce its reliance on nuclear power and to reform the regional monopoly enjoyed by the utilities, notably Tepco.

It appeared for a moment earlier this year that the government was serious about necessary reform when then trade and industry minister Banri Kaieda took disciplinary actions against his ministry's three high-ranking bureaucrats in charge of nuclear policies for failing to take proper steps after the Fukushima accidents.

This has proved illusory, as bureaucrats newly appointed to three crucial jobs at the Ministry of Economy, Trade and Industry (METI) belong to the "electric power village." The three are Kensuke Adachi, administrative vice minister, Ichiro Takahara, director general of the Agency for Natural Resources and Energy, and Hiroyuki Fukano, director general of the Nuclear and Industrial Safety Agency.

The term "electric power village" or "nuclear power village" has for some time been used to describe the cozy relations among politicians, bureaucrats and industry insiders with vested interest in maintaining the monopolistic status quo of the utilities and promoting nuclear power generation.

To discern the true intentions of METI, it is necessary to closely look at the subsequent reshuffle of ministry personnel at lower levels, notably the promotion of Toshihide Kasuya to head the Electric and Gas Industry Division, which is the keep of the "electric power village."

Between 2006 and 2007, Kasuya served as secretary to then METI minister Akira Amari, also a member of the "electric power village." Kasuya has since adopted anti-global warming measures that lack strong teeth vis-à-vis the power industry.

Osamu Goto, said to be the most well-versed in electric power policy, was appointed head of the General Policy Division of the natural resources and energy agency's Director General's Secretariat. As for past reform of power industry regulations, he undermined efforts by accepting the power industry's arguments.

The most conspicuous appointment was that of Tadao Yanase as counselor to the METI minister's secretariat. He has served as head of the natural resources and the energy agency's Nuclear Energy Policy Planning Division, regarded as the stronghold of the "nuclear power village."

Yanase developed strong ties with the power industry. He wrote the so-called Yanase Paper, which reflected the views and wishes of the power industry and called for strengthening the export of nuclear power-related technologies. Copies of the paper are said to have been distributed among politicians, bureaucrats and business leaders. Even today, the power industry is hopeful he will be promoted to administrative vice minister of METI, the highest bureaucratic post.

Nothing would have satisfied the power industry more than these appointments at METI. As a power industry insider confided: "We could not have hoped for anything better. Not only does the incumbent administrative vice minister have his child employed by Tepco but also all of his top lieutenants are members of the 'electric power village.' "

Looking at the new appointments, nobody close to the power industry or METI would think that METI would work toward reducing or eliminating Japan's reliance on nuclear energy or seek to break up the monopoly enjoyed by the utilities by separating power generation and power distribution in each power company.

Encouraged by these METI moves, Tepco has launched a "counteroffensive." Observers suspect that the company and METI bureaucrats resorted to behind-the-scenes tactics to influence a revision of a legislative bill related to Tepco's obligations to pay damages to victims of the Fukushima nuclear accident. The bill was revised by the Democratic Party of Japan, the Liberal Democratic Party and Komeito before it was enacted Aug. 3.

The revised bill not only prevents Tepco's bankruptcy but also passes on the costs of damages to the public in the form of higher electricity bills.

Having obtained a guarantee that it would not go under regardless of the size of compensation, Tepco is now busy protecting its assets. It does not appear to give any serious thought to an independent commission created by the government to look into its balance sheets.

One Tepco official has said the commission has no legal authority. Kazuhiko Shimokobe, chairman of the commission, lamented at one point that Tepco representatives were not cooperative in disclosing what Tepco was going to sell.

Once it gets off the hook of the commission, Tepco will in all likelihood launch an all-out campaign to fight any move to separate its power distribution and power generation operations. The company would work closely with METI, where powerful posts are now occupied by members of the "electric power village" or "nuclear power village."

One strong card Tepco holds is the argument that a "stable supply" of electricity is essential for Japan. The nation has been spared large-scale blackouts during the past summer, which had been feared because of the crisis at the Fukushima No. 1 nuclear power station and the delayed resumption of other nuclear power stations. Yet, the entire country is now fully aware of potential power supply shortage.

Another strong card in the hands of Tepco is the need to invest huge sums of money to maintain facilities for transmitting electricity from power stations to transformer substations and for distributing power from substations to end-users like factories, offices and homes.

These facilities are valued at more than ¥5 trillion — which is seven times more than the value of facilities related to nuclear power generation. Therefore, if power generation and distribution are separated, whoever purchases the transmission and distribution facilities would be stuck with huge financial burdens while having to ensure stable power supplies.

By playing these strong cards, Tepco is working toward its ultimate goal of the government's spinning off the ill-fated Fukushima nuclear power plant and making it a separate entity that would ultimately be liquidated with taxpayers' money. If this is realized, Tepco would be reborn as an "ordinary corporation" and METI would be able to vigorously promote nuclear power generation.

Tepco Chairman Tsunehisa Katsumata once boasted that the power industry was a lucrative business. His comment was hailed by METI. METI bureaucrats who looked at this closely have now been promoted to key posts within the ministry.

As long as they continue to control energy policy, the nation would have no chance whatsoever of implementing any fundamental reform.

This is an abridged translation of an article from the September issue of Sentaku, a monthly publication covering Japanese political, social and economic scenes.


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