Japan Mulls Plan for One Operator to Run All Reactors: Energy

Japan’s government is discussing a radical overhaul of its nuclear power sector, the world’s third largest, that would combine the nation’s 50 operating reactors into a single company to rebuild an industry that’s been effectively halted by the March 2011 Fukushima disaster.

The company would be owned by Japan’s nine regional utilities, and two wholesalers Japan Atomic Power Co. and Electric Power Development Co., while the government and local reactor makers would give financial and technical support, Taku Yamamoto, who chairs the ruling Liberal Democratic Party’s energy committee, said in an interview.

Part of the profit from sales of the new company’s electricity would be funneled toward the cleanup of Tokyo Electric Power Co.’s wrecked Fukushima atomic station and victim compensation, which combined may cost more than 11 trillion yen ($112 billion). The plan would keep Tokyo Electric alive to shoulder Fukushima costs and avert any blackouts in Tokyo, the host of the 2020 Olympics.

“The plan is based on Tepco’s profits covering Fukushima costs without taxpayers’ money and to increase the government’s role in the nuclear industry,” said 61-year-old Yamamoto. “Who’s going to like a bankruptcy of Tepco? The company has to go on working hard for the Fukushima disaster until it dies.”

Setting up a comprehensive nuclear-management company should help Japan expand its exports of reactors and operation skills as domestic electricity demand slows, Yamamoto said.

Tsuyoshi Numajiri, a spokesman for Tokyo Electric which is also known as Tepco, declined to comment on lawmakers’ discussions to spin off nuclear operations at utilities, saying such plans are subject to change.

Dramatic Overhaul

Discussions of such a dramatic overhaul of the nuclear industry signal growing momentum in the government to restructure an electricity supply model that helped rebuild Japan’s economy after World War II, only to be exposed by safety scandals that culminated in the Fukushima disaster.

All of the 50 reactors are currently shut after Kansai Electric Power Co. shut No. 3 and No. 4 reactors at its Ohi plant in western Japan in September for regular safety checks. None of the idled reactors may be restarted by the end of March 31 as preparations by power companies for the Nuclear Regulation Authority’s safety review are behind schedule, the Sankei newspaper reported Oct. 21.

LDP lawmakers have discussed other options to restructure Tepco. Tadamori Oshima, the head of the party’s 2011 earthquake reconstruction task force, proposed to the prime minister that Tepco form a separate company to deal with decommissioning the Fukushima plant and the government provide financial aid, Kyodo News reported on Sept. 21.

Reform Bill

Prime Minister Shinzo Abe’s government is seeking the Diet’s endorsement this month on a bill designed to end the six decade-old monopolies of the regional utilities led by Tepco.

The others -- which like Tepco dominate electricity generation and transmission in their respective regions -- are: Hokkaido Electric Power Co., Tohoku Electric Power Co., Chubu Electric Power Co., Kansai Electric, Hokuriku Electric Power Co., Chugoku Electric Power Co., Shikoku Electric Power Co. and Kyushu Electric Power Co.

The draft bill would unbundle generation and transmission operations and allow households to choose power suppliers for the first time. In theory, 60 percent of Japan’s electricity market has been deregulated, though in practice the dominance of the regional utilities stands in the way.

Japan’s regional utilities produced 90 percent of Japan’s electricity output in the year ended March 31, according to data compiled by the Ministry of Economy, Trade and Industry.

Utilities’ Dominance

“The power industry reform bill would help stop utilities’ dominance in Japan and encourage more newcomers from home and abroad to enter the mature power market,” Yamamoto said.

“The passage of the legislation is a prerequisite for the unification of nuclear plant management to move forward,” said Yamamoto who has studied Japan’s nuclear power industry for three decades and chairs the LDP’s committee to discuss the country’s strategic natural resources and energy policy.

Tepco should sell all its power-generating assets including the Kashiwazaki Kariwa nuclear plant in Niigata prefecture and reshape itself as an electricity transmission and distribution company, according to Takeo Kikkawa, a commerce professor at Hitotsubashi University.

“A breakup of Tepco would create a wave of asset sales in the greater Tokyo power market as Japanese oil refiners and gas companies are expanding power-generation business to diversify their business portfolio,” Kikkawa said. “It’d be a time of big mergers and acquisitions in the power industry in years ahead,” said Kikkawa who studies Japanese corporate management and the energy industry.

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