(Updates with power reform bill in 13th paragraph.)
Nov. 1 (Bloomberg) -- More than 30 months after an earthquake triggered the world’s worst nuclear disaster in a quarter of a century, Prime Minister Shinzo Abe is being told by his own party that Japan’s response is failing.
Plant operator Tokyo Electric Power Co. alone isn’t up to the task of managing the cleanup and decommissioning of the atomic station in Fukushima. That’s the view of Tadamori Oshima, head of a task force in charge of Fukushima’s recovery and former vice president of Abe’s Liberal Democratic Party.
“I’d like them to form a strong, unified authority” to deal with the nuclear disaster, Oshima told reporters in Tokyo yesterday after releasing a report on the recovery effort that will be taken to Abe. It indicates that the utility known as Tepco could be broken up, and that the government should take over and shoulder the bulk of the costs of the cleanup by treating it as a public works project.
The report is part of a growing recognition that the government needs to take charge at the Fukushima station as weekly reports of contaminated water leaks and accidents jar with a speech Prime Minister Abe made to the Olympic Committee in September that the situation is “under control.” Tokyo won the right to host the Olympic Games in 2020.
Tokyo Electric, which returned to profitability in its first-half earnings report yesterday, is handling an estimated 11 trillion yen ($112 billion) cleanup of the nuclear plant wrecked by an earthquake and tsunami in 2011. At the same time, it’s trying to operate as a company generating power for its 29 million customers.
Tepco shares rose 1.9 percent to 533 yen in Tokyo at 1:36 p.m., while the benchmark Nikkei 225 index fell 0.8 percent.
The two tasks are not compatible as the utility doesn’t have an incentive to invest in Fukushima, which is a lost cause compared with businesses that will make money, said CLSA Asia- Pacific Markets analyst Penn Bowers. That’s hindering the recovery by delaying technical solutions the utility deems it cannot afford, Sumio Mabuchi, a government point man on the crisis in 2011, said.
“We’ve seen over time that Tokyo Electric has put most of its effort and investments into ensuring business continuity,” Mabuchi, a lawmaker with the now opposition Democratic Party of Japan, said. “It’s been very reluctant to spend the kind of money that’s needed to resolve this accident. If we allow the situation to continue, it’ll never be resolved.”
Other advisers are urging a more radical response. The ruling party’s energy committee, led by Taku Yamamoto, is calling for the creation of a new company to run Japan’s 50 active reactors, the committee chairman said last month. The clean-up may be assigned to a state-led decommissioning agency, Abe’s acting policy chief Yasuhisa Shiozaki said last month.
“Ultimately the company must presume that the plant will be in some way nationalized or separated out, meaning Tepco could be reluctant to fund what will ultimately be another’s burden,” CLSA’s Bowers said in an interview.
Neither can the company fully operate as a normal listed entity because of its Fukushima liabilities, Bowers said.
John Studzinski, head of Blackstone Group LP’s advisory unit, said at a briefing in Tokyo last month that Tepco could win back investors. “There’s obviously an opportunity there to invest in something once you figure out how to fix it or how to create a new business model that is more efficient,” Studzinski said.
Japan’s lower house of parliament today passed a bill to reform the electricity industry, in a meeting broadcast on the institution’s website. The reform seeks to bolster competition and set up a new body around 2015 to coordinate national power supply and demand.
Tepco’s concerns about its bottom line derailed an earlier plan to build an underground wall around the Fukushima nuclear site, which would stop groundwater from flooding in and causing a massive backlog of radioactive water, Mabuchi said in a briefing in Tokyo last month.
With an engineering background and experience in several ministerial posts, Mabuchi was drafted in as then Prime Minister Naoto Kan’s aide on the Fukushima response on March 26, a little over two weeks after the accident.
Mabuchi said he proposed the underground wall plan in 2011 and it’s referred to in Tepco’s own presentations during the same year. The utility “balked” at the 100 billion yen estimate, saying the spending could push it to bankruptcy, said Mabuchi.
Tepco disputes this. “It was technological, not cost issues,” spokesman Tatsuhiro Yamagishi said. “It wasn’t the optimum solution for such a large area.”
Two and a half years later, it is the government that has stepped in to build an underground ice wall around the site with taxpayer funds.
Tepco yesterday reported an operating profit in the first half after cutting costs and boosting revenues through higher electricity rates.
The operating profit was 167.2 billion yen for the six months ended Sept. 30, compared with an operating loss of 104.6 billion yen a year ago, according to a statement from the company. Net income was 616.22 billion yen after a government injection into the utility’s fund for payouts to people and companies affected by the Fukushima disaster.
--With assistance from Jacob Adelman and Takashi Hirokawa in Tokyo. Editors: Jason Rogers, Abhay Singh