JAPAN | Gov’t leaders created secret plan aiming to break up TEPCO after nuke crisis

Posted on July 6, 2011

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JAPAN | MAINICHI | 6 July 2011

Tokyo Electric Power Co. headquarters in Tokyo's Chiyoda Ward. (Mainichi)

Deputy Chief Cabinet Secretary Yoshito Sengoku and other central government figures created a secret plan aiming to break up Tokyo Electric Power Co. (TEPCO) in the wake of the crisis at the company’s Fukushima No. 1 Nuclear Power Plant, it has been learned.

In June the government passed a bill on support for TEPCO, which faces massive compensation claims in the wake of the crisis, but under the plan this was merely an “emergency measure.”

The plan also called for reforms to the current system under which power companies single-handedly generate and distribute power. One government official who helped create documents on the plan said the overhaul of TEPCO focused on dividing up the company’s generation and distribution of power and nationalizing its nuclear power plants.

Between April and early May, while the government was considering support measures for TEPCO, company Chairman Tsunehisa Katsumata met quietly with Sengoku at the Prime Minister’s Office. With him, Katsumata had a document stating that the Great East Japan Earthquake was a “massive natural disaster,” which the Law on Compensation for Nuclear Damage says nuclear power companies do not have to cover, and he argued that TEPCO was not obligated to provide compensation. However, Sengoku dismissed the claim, pressing the company to sort out its finances.

Prime Minister Naoto Kan addresses a meeting in Tokyo on March 16, 2011. (Mainichi)

Prime Minister Naoto Kan addresses a meeting in Tokyo on March 16, 2011. (Mainichi)

Sources familiar with the meetings said Sengoku envisaged selling off TEPCO’s power distribution business, nationalizing its nuclear power plants and restricting the company’s business to thermal and hydro power generation. The move would leave TEPCO with just 1.6 trillion yen worth of its electrical industry assets, which now exceed 7 trillion yen. It would also break TEPCO’s monopoly on regional power generation and distribution — criticized as a breeding ground for the bureaucratic makeup of the company that formed the background to the Fukushima nuclear crisis. Through the move, profits from the sale of the power distribution business could be put toward compensation over the nuclear disaster.

After several meetings between Sengoku and Katsumata, the Ministry of Economy, Trade and Industry created a draft on support for compensation payments which said electricity fees would need to be raised by 16 percent in order to pay compensation. Under the draft, TEPCO would continue to pay compensation while receiving support from the government. At the same time, the extra fuel costs incurred during TEPCO’s switch from nuclear to thermal power would be transferred to power bills, and profits gathered would be used as capital in repayments to the government.

Under this plan, the structure of earnings for TEPCO — which up until now has had its yearly income of about 5 trillion yen guaranteed though its monopoly on regional power generation and distribution — would be maintained, and the costs arising from the nuclear crisis would be passed onto consumers in the form of higher power bills.

Sengoku, however, blasted ministry officials over the plan.

In this March 20, 2011 aerial file photo taken by a small unmanned drone and released by Air Photo Service, the crippled Fukushima No. 1 Nuclear Power Plant is seen in Okumamachi, Fukushima prefecture. From top to bottom: Unit 1, Unit 2, Unit 3 and Unit 4.  (AP Photo/Air Photo Service)

In this March 20, 2011 aerial file photo taken by a small unmanned drone and released by Air Photo Service, the crippled Fukushima No. 1 Nuclear Power Plant is seen in Okumamachi, Fukushima prefecture. From top to bottom: Unit 1, Unit 2, Unit 3 and Unit 4. (AP Photo/Air Photo Service)

“Placing such a burden on members of the community won’t hold water in public,” he said.

At the same time, TEPCO’s announcement on its account settlements for the business year ending in March was due in the latter half of May. Markets were anxious amid spreading speculation that TEPCO would be saddled with a huge compensation bills if government measures on compensation support were not finalized, leaving the company with excessive liabilities.

Pressed to act, Sengoku and other officials at the Prime Minister’s Office compiled support measures based on the Economy, Trade and Industry Ministry’s plan, without mentioning an increase in electricity fees. At the same time, an internal document stating that the support measures were introduced to merely facilitate the settlement of TEPCO’s accounts and that they were emergency measures to avoid upsetting markets, was created and passed on to Katsumata. The document also stated that deliberation on breaking up TEPCO would move forward in the future.

On May 16, three days after the government announced the support measures, Chief Cabinet Secretary Yukio Edano said that the splitting of power generation and distribution was entirely plausible as an option. On May 18, Prime Minister Naoto Kan added that the issue should be debated.

The idea of splitting up power generation and distribution in Japan is not new. About 10 years ago the issue arose during debate surrounding global deregulation of electric utilities. It was spearheaded by some TEPCO opponents in the Ministry of Economy, Trade and Industry, which enjoyed a cozy relationship with the utilities firm. However, the power industry got the then-ruling Liberal Democratic Party (LDP) on board and strongly resisted the suggestion, derailing it.

This March 24, 2011 aerial photo taken by a small unmanned drone and released by AIR PHOTO SERVICE shows damaged Unit 3 of the crippled Fukushima Dai-ichi nuclear power plant in Okumamachi, Fukushima Prefecture, northeastern Japan. (AP Photo/AIR PHOTO SERVICE)

This March 24, 2011 aerial photo taken by a small unmanned drone and released by AIR PHOTO SERVICE shows damaged Unit 3 of the crippled Fukushima Dai-ichi nuclear power plant in Okumamachi, Fukushima Prefecture, northeastern Japan. (AP Photo/AIR PHOTO SERVICE)

Sengoku has eyed changes in the current system of power generation and distribution, saying, “We will destroy the feudal system created under the LDP administration that placed electric power companies at the pinnacle.”

However, with Kan having announced he is prepared to resign, the drive to split up TEPCO lacks power. An official at the Ministry of Economy, Trade and Industry — which in the past has allowed retired officials to land executive positions at TEPCO — sarcastically stated, “It’s just an appeal to show they are going after TEPCO. This administration doesn’t carry out anything it says.”

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