Fukushima disaster sheds light on lack of preparedness for compensation

The crisis at the tsunami-hit Fukushima No. 1 Nuclear Power Plant has shed light on a lack of preparedness on the part of the government and utilities to pay massive amounts of compensation for a nuclear accident, which has placed a burden on the public.

At a panel of experts at the Japan Atomic Energy Commission (AEC), there have been calls since this past January for reviewing the current system under which nuclear plant operators are responsible for paying compensation for accidents without limits and setting an upper limit on damages.

"The number of nuclear power plant operators could decrease as long as they are required to bear risks exceeding their limits," one member said.

"It's important for operators to bear responsibility for such accidents on condition that they could have predicted such disasters," another stated.

These problems emerged because operators cannot ascertain risks involving the operation of atomic power stations unless they can estimate the amount of compensation for accidents.

However, others in the panel argued that operators would cut back on their investment in safety measures unless they are to bear unlimited responsibility. As such, the overall direction of debate on the issue has not been set.

Under the current nuclear plant accident compensation system, atomic power station operators bear unlimited responsibility for compensation for accidents except in cases of massive natural disasters. However, there is no clear definition of "massive natural disasters," and the national government is only required to extend the necessary assistance for efforts to deal with such accidents.

Following the outbreak of the Fukushima nuclear disaster, the national government placed Tokyo Electric Power Co. (TEPCO), the operator of the stricken plant, effectively under state control by providing the firm with an infusion of 1 trillion yen in public funds.

The government then created a system under which it loans necessary money for compensation payments to TEPCO via the Nuclear Damage Compensation and Decommissioning Facilitation Corp. (NDF) without interest. Thus the situation in which TEPCO would go under and become unable to pay compensation to victims of the nuclear crisis has been avoided.

When it placed TEPCO under de-facto state control, the central government explained that the operator of the plant would shoulder the responsibility in principle. However, the reality is different from the government explanation.

Kenichi Oshima, professor at Ritsumeikan University, estimates the total cost of dealing with the nuclear crisis at 13.3 trillion yen. The estimated cost includes 6.2 trillion yen to pay compensation, 2.5 trillion to decontaminate areas tainted by radioactive substances, 2.2 trillion yen to decommission reactors and bring the disaster under control, and 1.1 trillion yen to build interim storage facilities for waste contaminated with radioactive materials.

Of the total amount, TEPCO is likely to pay just over 3 trillion yen on its own, including part of the cost for bringing the crisis under control and paying compensation.

Most of the money needed to pay compensation will be secured from "general contributions" that operators of nuclear plants extend to the NDF. Much of the contributions are passed onto electricity bills consumers pay to utilities. Taxpayers' money will be spent on the construction of interim storage facilities. Decontamination costs, which the government temporarily foots, will be covered with proceeds from the sales of shares the government holds in TEPCO to lessen the burden on the utility.

"The public is required to effectively shoulder over 70 percent of the costs. The public is being required to pay the costs in a way that lacks transparency," Oshima said.

If the response to the accident progresses to a certain extent and TEPCO has rehabilitated itself, the government can recover the money it invested in the utility and prevent any increase in the burden on the public. However, this is no easy task.

A high-ranking official of TEPCO's Kawasaki Thermal Power Plant says it has been successful in streamlining its regular checkup on its generators, shortening the checkup period, increasing the ratio of operation of the latest and most efficient generators and raising the profits by up to hundreds of millions of yen a day.

Learning how to rationalize operations from a worker who had previously worked for Toyota Motor Corp., the plant monitored plant workers' moves by seconds to reduce time wasting.

"We succeeded in reducing the checkup period, which used to be 80 days in the pre-quake period, to 60 days," the official said.

However, the increase in profits is attributable mainly to a sharp decline in oil prices. TEPCO posted a pretax profit of 436.2 billion yen in the April-December 2015 period on a consolidated basis. This is largely because fuel costs decreased by about 730 billion yen from the corresponding period of the previous year. If crude oil prices increase, it will offset reductions in expenses.

If the idled Kashiwazaki-Kariwa Nuclear Power Plant in Niigata Prefecture is to be reactivated, it will increase TEPCO's monthly profits by 8 to 13 billion yen per reactor. However, there are no prospects that the plant can be reactivated in the foreseeable future.

If the government is to use the proceeds from its sales of TEPCO shares to fully cover decontamination expenses, the value of one share must exceed 1,000 yen. However, the current price is about the half that amount.

The government and electric power companies had promoted the use of atomic power by emphasizing that its costs are low. However, they failed to include risks of accidents and safety measures in power generation costs, and where the responsibility for nuclear accidents lies has remained unclear. As a result, members of the public are being forced to foot the costs and TEPCO is allowed to survive.

A system under which the government and private sector share the burden of nuclear accidents in an appropriate manner has not yet been established.