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The $64 billion question – 3 reasons why Japan should nationalise TEPCO

Japan’s nuclear conundrum, The $64 billion question, Once the Fukushima nuclear plant is stable, the government should temporarily nationalise its operator The Economist Nov 5th 2011

The government should act fast to nationalise Tepco and hold it temporarily in public ownership as it clears out the old management and oversees the clean-up. Then it should reprivatise a thoroughly reformed utility. Three reasons argue for Tepco to be nationalised.

First, as a basis for holding the company to account. Despite failing
to anticipate the devastating earthquake and tsunami, and a dismal
performance after they hit, Tepco’s management remains broadly in
place, and shareholders and creditors are being bailed out. Injecting
money into the company smacks of the sort of complicity between the
nuclear industry and its political overseers that helped get Japan
into this nuclear mess. Though the ¥5 trillion will pass through
Tepco’s hands, the company has no legal obligation to register it as a
loan on its balance-sheet or say how it will be repaid. For now,
taxpayers, not the shareholders or bondholders, bear all the risk.

Second, to ensure that Tepco’s financial restructuring is safe. The
firm has agreed to cut costs by ¥2.5 trillion over the next ten years,
but this may well compromise safety. Already there are reports of
workers slopping about in radioactive water wearing leaky boots. In
the short run the state can better oversee this transition as an owner
with day-to-day responsibilities, before privatising Tepco in order to
re-establish the necessary division between operator and regulator.

Third, as a demonstration that the government will no longer grant
special favours to the nuclear industry. Failure to intervene would
underline how Tepco, along with Japan’s other power utilities,
continues to intimidate the government. The utilities have huge
political power, helped by a pliant media and the support of big
businesses selling services at inflated prices. If the government
fails to discipline Tepco, it will struggle to win the country’s
confidence over other aspects of nuclear oversight. That includes the
promise by Yoshihiko Noda, the prime minister, to conduct “stress
tests” to ensure that the rest of Japan’s 54 nuclear reactors, most of
them now suspended, can safely be restarted.

At Fukushima, more bills will come due, including for removing
radioactive topsoil from a vast area. The longer the government
dithers over nationalising Tepco, the more the costs will rise and the
impetus for action will wane. Tens of thousands have lost homes,
businesses and confidence in their children’s health as a result of
the disaster at Fukushima. Don’t let their suffering be for nought.

http://www.economist.com/node/21536600

November 4, 2011 - Posted by Christina Macpherson | Japan, politics