The central government approved a framework on May 13 for providing support to Tokyo Electric Power Co. as it pays out compensation for damages arising from the accident at the crippled Fukushima No. 1 nuclear power plant.
The central government approved a framework on May 13 for providing support to Tokyo Electric Power Co. as it pays out compensation for damages arising from the accident at the crippled Fukushima No. 1 nuclear power plant.
The framework is predicated on maintaining TEPCO as a viable company that does not end up with excess liabilities.
However, because the plan could lead to electric power companies passing on the compensation costs through higher electric rates, debate in the Diet on the legislation to implement the plan will likely be heated.
A new organization will be established to provide funds to TEPCO for its compensation payments, and the government plans to submit legislation to the Diet to create that group.
The framework will not set an upper limit on TEPCO's compensation obligation, but will be structured to prevent a TEPCO bankruptcy.
After the Cabinet of Prime Minister Naoto Kan OK'd the plan, Banri Kaieda, the economy minister, said at a news conference, "We want to minimize the amount that is passed on to consumers through higher electric rates."
However, the plan does not envision further burdens being placed on financial institutions that make loans to TEPCO or the company's stockholders.
That could raise questions about the fairness of the overall framework.
Asked about injecting public funds when financial institutions are not being asked to forgive debt, Chief Cabinet Secretary Yukio Edano said on May 13, "That will undoubtedly not gain the understanding of the public. We believe we will gain the cooperation of financial institutions."
While public funds in the form of government bonds that can only be cashed for special purposes will be injected into the new organization, TEPCO will be expected to repay those funds through the new organization, meaning taxpayers will not be burdened.
In exchange, government officials will oversee efforts by TEPCO to reduce operating expenses and other restructuring measures.
The new organization will be established to provide support for compensation in the event of nuclear accidents.
The 10 electric power companies that operate nuclear power plants will be obligated to contribute funds to the organization, which can continue to exist to deal with nuclear accidents in the future.
The new organization will provide funds to TEPCO to pay compensation as well as to invest in new plant facilities. There will be no limit to the support provided or the number of times the support can be given.
The government will guarantee loans made to TEPCO by financial institutions. The new organization will provide consultation services to victims of the nuclear accident and can also acquire TEPCO assets to support restructuring measures.
TEPCO will be asked to sell its stock portfolio, real estate and other assets to come up with the funds needed for compensation.
Any funds TEPCO receives from the organization will have to be repaid out of any profits that the company may eventually record, while excluding the amount spent on plant investment and within limits that do not interfere with the stable supply of electricity.
With a number of nuclear power plants no longer operating due to the March 11 Great East Japan Earthquake, TEPCO will have to depend on thermal power plants, and an increase in fuel costs could lead to higher electric rates. To oversee company management, a third-party committee made up of lawyers and accountants will be set up to ensure thatTEPCO is making every effort at restructuring and reducing expenses.
Because the electric power companies that contribute funds to the new organization could raise rates to come up with their contributions, government officials will try to convince the companies to come up with the amounts through restructuring efforts.
The May 13 agreement also included wording that indicated there will be future debate on the liberalization of the electric power industry. A document for the agreement said, "Consideration will proceed in order to implement revision of energy policy, including the form that electric power companies take."