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Fukushima plant decommissioning, compensation costs to almost double: gov't est.

The Ministry of Economy, Trade and Industry estimates that the cost of decommissioning the disaster-stricken Fukushima No. 1 Nuclear Power Plant and compensation for disaster damage would top a total of 20 trillion yen -- almost twice the previous government forecast, it has been learned.

As the government is planning to have major utilities and smaller power companies that newly entered into the power market after its liberalization shoulder part of the snowballing financial burdens, consumers are certain to face increased electricity bills. The ministry is set to draw a conclusion later this year possibly based on the estimate after continuing discussions at an expert panel on the management reform of plant operator Tokyo Electric Power Co. (TEPCO) and on measures to secure financial resources.

The government had previously estimated that a total of 11 trillion yen would be needed to cover the projects -- 5.4 trillion yen for nuclear damage compensation, 2.5 trillion yen for decontaminating areas affected by the nuclear disaster, 1.1 trillion yen for building interim storage facilities for radiation contaminated soil and 2 trillion yen for decommissioning reactors at the Fukushima No. 1 nuclear plant.

In the latest estimate, the compensation cost is expected to surge to roughly 8 trillion yen and the decontamination cost is estimated at somewhere around 4-5 trillion yen. It is also highly likely that the decommissioning cost would spike by several trillion yen. The development cost for interim storage facilities remains unchanged.

The previous government estimate was calculated toward the end of 2013, but the coverage of nuclear damage compensation has since increased and decontamination efforts are taking longer than expected. The decommissioning cost has also expanded especially for work to salvage nuclear fuel debris from the 2011 meltdowns. The ministry had earlier projected that the yearly cost for these projects would reach hundreds of billions of yen from the current 80 billion yen.

The government had heretofore explained that: the compensation cost would be temporarily paid by the Nuclear Damage Compensation and Decommissioning Facilitation Corp. (NDF) before being covered by TEPCO and other major utilities; the decontamination cost would be covered by the government after it sells the TEPCO shares that it owns; revenue from the power resources development promotion tax would be used for the construction of interim storage facilities; and the reactor decommissioning cost would be secured by TEPCO.

The government is now looking into boosting the amount temporarily covered by the NDF, while tacking the snowballing compensation cost onto major utilities and new power providers that use power grids operated by existing power transmission companies. The power grid usage fees, which require government approval, are ultimately to be passed on to consumer electricity bills.

As it is highly likely that the proceeds from the sale of TEPCO shares are too small to cover the decontamination cost, the government is mulling demanding TEPCO and other utilities share the financial burden. In that case, the expenses may likely be passed onto electricity bills.

The government will consider establishing a system in which TEPCO accumulates funds through business streamlining efforts to cover the decommissioning cost. As it is widely deemed difficult to cover the cost only through management efforts, however, the expenses may likely be -- again -- tacked onto power bills.

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