JAPAN | EDITORIAL: Taxes should not be used to bail out TEPCO

Posted on August 4, 2011

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JAPAN | ASAHI SHIMBUN | 4 August 2011

A new law has been enacted to ensure the payment of compensation to people who have suffered damage from the devastating accident at the Fukushima No. 1 nuclear power plant, operated by Tokyo Electric Power Co. (TEPCO).

A new entity for the purpose will be created as early as August with funds provided by operators of nuclear power plants. As a first step to help TEPCO finance the compensation payments, the government will issue 2 trillion yen worth of no-interest-bearing grant bonds.

The government-drafted bill was revised so as to incorporate the demands of the main opposition Liberal Democratic Party and New Komeito into the legislation.

The resulting law is clearly a product of conflict between proponents of reform of the electric power industry and supporters of the status quo. Both the ruling and opposition parties are divided on this issue and the new legislation contains many vague provisions that are open to different interpretations by the two groups.

As for the issue of government responsibility, the biggest of the opposition demands, a provision has been added to make clear that the government must make every effort to ensure “swift and appropriate” compensation payments.

Another added provision allows the government to make budget outlays to pay for compensation in case the grant bonds turn out to be insufficient.

In order to prevent victims of the nuclear disaster from being shortchanged, the government has no choice but to accept ultimate responsibility for the compensation payments.

Before taxpayer money is used, however, all steps should be taken to hold the stakeholders in TEPCO accountable through bankruptcy proceedings. As well as thorough restructuring of the company, measures like reduction of capital and debt waivers by creditors should also be taken.

The Cabinet decision to stop the company’s liabilities from exceeding its assets would have been a major obstacle to the drive for such accountability. However, both houses of the Diet passed a supplementary resolution calling for the reconsideration of the decision. The administration of Prime Minister Naoto Kan has indicated its willingness to respect the will of the Diet.

There were also concerns that TEPCO’s bankruptcy would lead to uniform cuts in the firm’s compensation liabilities, which would be trumped by other debts in bankruptcy proceedings. That problem has been basically been solved by the clarification of the government’s responsibility for the compensation payments.

Now, the government should act swiftly to determine the scope of compensation and evaluate TEPCO’s assets. The bankruptcy process should start as soon as a state of negative net worth becomes apparent, if the revised bill is interpreted in a straightforward manner.

In the final stage of the Diet deliberations on the bill, however, a document spelling out the elements in the original bill that “must not be revised” came to light. The document is believed to have been compiled by the Ministry of Economy, Trade and Industry to prevent TEPCO from falling into negative net worth.

There are signs that the document influenced discussions between the ruling and opposition camps over the bill.

The new law does not outline specific measures to make TEPCO and its shareholders and creditors pay a price for the nuclear disaster.

Without close monitoring, the law could be implemented in a manner that gradually paves the way for the unjustifiable use of taxpayer money to finance compensation.

Victims of the accident need immediate relief. Debate on this urgent matter should not be allowed to drag on.

There are details that need to be worked out, such as the specific payment procedures, and the establishment of the agency responsible for these vital tasks should be expedited.

Whether the vague provisions of the law will be interpreted and enforced in the right way depends on the Diet’s ability to act as an effective watchdog.

Taxpayer money intended to ease the plight of disaster victims should not be used to keep the utility alive.

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Posted in: JAPAN