Govt takes on heavy burden in nationalizing TEPCO

The nationalization of Tokyo Electric Power Co. means that the government will be required to shoulder greater responsibilities for important energy polices such as resuming operations of suspended nuclear reactors.
On Friday, TEPCO and the government's Nuclear Damage Liability Facilitation Fund submitted the power company's comprehensive business rehabilitation plan to Economy, Trade and Industry Minister Yukio Edano. Edano is expected to approve the plan, which was prepared jointly by the two entities, in early May or later.
The plan was a prerequisite for TEPCO to receive 1 trillion yen in public funds. Now the power company needs to speed up reform of its management.
The main point of the business rehabilitation plan is the government's acquisition of a majority equity stake in the power company on a voting-rights basis, which effectively means the company will be nationalized. TEPCO's management team will also be changed drastically, with Kazuhiko Shimokobe, head of the Nuclear Damage Liability Facilitation Fund's steering committee, assuming TEPCO's chairmanship.
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Govt required to do more
As TEPCO's new top shareholder, the government will be required to take a more active role in resolving the nuclear crisis at the Fukushima No. 1 nuclear power plant and compensating victims of the crisis.
We give credit to TEPCO's business rehabilitation plan for increasing the amount of cost reductions planned over the next 10 years from 2.6 trillion yen to more than 3 trillion yen. We ask the power company to continue its consistent efforts to trim costs.
The plan also sets a goal of moving into the black in fiscal 2013 through measures such as raising household electricity rates and resuming operations of the Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture.
However, this goal is unlikely to be easily achieved.
TEPCO's sloppy handling of recent price hikes for large-lot customers prompted strong public criticism. Under such circumstances, it will be difficult for the power company to obtain public consent for raising household electricity rates. The power company also needs to dispel public distrust regarding the safety of nuclear power plants to resume operations of the Kashiwazaki-Kariwa plant.
Of course, it is TEPCO's duty to earnestly ask the public to support the electricity price hike and the resumption of the nuclear power plant's operations, but the government must not leave those tasks up to the power company. The government should take the lead in persuading the public, because owning the power company means the government will be directly responsible for approving TEPCO's price hike plan and deciding whether the reactivation of nuclear power plants is appropriate.
It is also worthy to note that an attempt to introduce the so-called "in-house company system" was incorporated in TEPCO's business rehabilitation plan. It is a good idea to increase employees' awareness of costs by dividing the power company into smaller units, such as a thermal power generation section and an electric transmission and distribution section, and give each of them a certain level of autonomy.
However, it will be a problem if the power company uses management reform as a springboard to reforming the electricity system without the public noticing, such as separating power generation and transmission. Electricity system reform should be discussed carefully as a medium- and long-term issue.
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TEPCO's bleak outlook
There is concern that TEPCO's costs related to the nuclear crisis may increase by trillions of yen, due to factors such as the decommissioning of the Fukushima No. 1 nuclear power plant and the need to decontaminate areas affected by radiation. Under the current system of support for the power company, such costs are shouldered by the government only temporarily. The power company will be required to pay back the loans to the government over a long time.
If TEPCO is unable to show positive prospects for the future, it could prompt growing numbers of talented employees to leave, and the company itself could be restrained in its investments in plant and equipment. Under such circumstances, the company would have difficulty carrying out its vital missions of ending the nuclear crisis, paying compensation to victims and providing a stable energy supply.
If the costs of the nuclear crisis exceed the level that a private company can handle by itself, the government should pay a reasonable share.

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