Japan Grapples with Cost of Scrapping Fukushima Plant

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Tepco’s Fukushima Daiichi nuclear plant, site of the 2011 meltdowns.

TOKYO — Tokyo Electric Power Co. Holdings promises to shoulder as much of the burden as possible in dealing with the aftermath of the nuclear meltdown in Fukushima, but additional outside assistance is deemed inevitable to cover the gargantuan cost of dismantling the facility.

An expert panel under the Ministry of Economy, Trade and Industry began deliberations over the additional costs of the 2011 disaster on Wednesday. Attendees included Yoshimitsu Kobayashi, chairman of the Japan Association of Corporate Executives, and Akio Mimura, chairman of the Japan Chamber of Commerce and Industry.

“We want to fully meet our responsibility for the Fukushima disaster without receiving government assistance,” said Tepco President Naomi Hirose, who attended as an observer.

Tepco has allocated 2 trillion yen ($19.3 billion) so far in preparation for the decades-long process to decommission its Fukushima Daiichi nuclear plant. But it is expected to need trillions more once it starts to remove melted nuclear nuclear fuel from the site.

The bulk of the cost will not hit until the 2020s, so the government has made little progress in creating a framework to provide assistance, unlike efforts in compensating victims and decontaminating the surrounding area.

Hirose explained that once Tepco can give a realistic estimate, it will be required to recognize the entire cost at once and could turn insolvent. “We’d like the government to come up with a framework to eliminate such risks,” he said.

The panel will project decommissioning costs in its future meetings, and will make recommendations to Tepco regarding necessary reforms and restructuring by the end of the year. The utility will aim to create a new management plan in January based on the panel’s proposals. The economy ministry will iron out details on how to assist Tepco based on the expense estimate, such as by creating a reserve fund where Tepco can put aside the necessary money.

The discussion will focus on how much of the cost Tepco can assume through internal reforms. In addition to dismantling the plant, total compensation to victims is already expected to top 6.4 trillion yen, while decontamination could cost about 4 trillion yen — both above projections from January 2014. It will take Tepco and other major utilities decades to pay that off under the current framework. An update is in order.

“I am not in favor of any rescue plan that involves the government shouldering what Tepco should be paying,” said Hitotsubashi University professor Kunio Ito, who heads the expert panel. But he said something like that could happen “as a last resort.” A ministry official also suggested there may be a debate on raising electricity prices to help fund the decommissioning.

If the plan is to hike rates on customers not served by Tepco, the utility needs to put forth a strategy for reform that can satisfy the entire Japanese public. The government’s program will depend on how far Tepco is willing to go.

http://asia.nikkei.com/Politics-Economy/Policy-Politics/Japan-grapples-with-cost-of-scrapping-Fukushima-plant

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