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Secret deal reached to have new firms also pay nuclear compensation

Major power companies, ruling Liberal Democratic Party (LDP) legislators promoting nuclear power and bureaucrats have agreed behind closed doors to require new market entrants to shoulder part of the compensation costs to those affected by the Fukushima nuclear crisis.

    Three high-ranking officials of the Federation of Electric Power Companies of Japan (FEPC) representing major power companies met separately with a few LDP legislators at the Diet members' office building just across from the Diet Building in early September 2016.

    The FEPC officials showed a 10-page document estimating that the amount of compensation to those affected by the nuclear disaster, which broke out in March 2011, would sharply increase.

    Tokyo Electric Power Co. (TEPCO), the operator of the tsunami-ravaged Fukushima No. 1 Nuclear Power Plant, and other major power companies have paid some 160 billion yen annually in compensation for the nuclear disaster.

    FEPC executives asked that new companies, which have entered the liberalized power market, also foot part of the costs of paying compensation, fearing that major utilities could be required to fully shoulder the increasing costs of compensation payments.

    Explaining that member companies' business environment has become increasingly severe because of the intensifying price competition in the liberalized industry, one of the industry body executives told the LDP lawmakers, "I'd like to ask you to avoid requiring only major companies to bear the increasing burden."

    The executive also asked the legislators to keep the estimate a secret saying, "This document doesn't officially exist."

    FEPC also lobbied the Economy, Trade and Industry Ministry over the issue by showing the same document to bureaucrats. The ministry agreed to require new power firms to shoulder part of the costs of increasing compensation.

    Prior to these moves, TEPCO Holdings, Inc. predicted in late July that the costs of dealing with the disaster at the Fukushima No. 1 complex would sharply increase, and asked the government for financial assistance. The costs include compensation payments, decommissioning of the reactors at the crippled power station and decontamination of areas tainted by radioactive substances leaking from the plant.

    The national government currently temporarily shoulders the costs of compensation payments and decontamination. TEPCO and other major power suppliers are supposed to later pay the compensation costs to the government while funds to cover the costs of decontamination are supposed to be raised through the sale of TEPCO shares the government holds. How to raise funds to make up for the increase in the estimated amount of compensation from 5.4 trillion yen to 7.9 trillion yen poses a challenge.

    The Economy, Trade and Industry Ministry set up two panels of experts in late September to discuss the issue. At the time, the ministry had a plan to add part of the costs of compensation payments to the transmission fees that smaller power companies pay for their use of major utilities' power grids.

    In the 2020 power industry reform, major power companies' retail and power transmission divisions will be separated and retail firms as well as smaller power companies will be required to pay transmission fees to power companies. The costs will in turn be passed on to consumers.

    The ministry then proposed that consumers who have benefited from nuclear power be broadly required to shoulder the costs of compensation payments in proportion to the benefits they have received.

    Since the setup and changes of transmission fees do not require revisions to relevant legislation, such a decision can be made without going through Diet deliberations.

    The ministry and legislators from the governing bloc joined hands in deciding to add the costs to the transmission fees.

    "If the bailout of TEPCO were to be deliberated in the Diet, no one could predict how the matter would develop," said a senior official of the ministry.

    "It'd be troublesome if we were to be grilled by opposition parties over the issue," said a mid-ranking LDP legislator.

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