At the moment TEPCO was in a fight for its own survival. A company that many believed was too big to fail would soon become a ward of the state. This was more than just a corporate icon falling on hard times. Soon, the cost of TEPCO’s lax oversight, failed planning, and propensity for high-stakes gambles would shift from a private debt to a massive public one.
Estimates of the cost of cleanup and compensation to victims of the Fukushima Daiichi accident were pegged at more than $71 billion (6.6 trillion yen) by late 2012. Much of that burden will fall on the shoulders of Japanese taxpayers, already suffering from a deeply troubled economy.
As Japan marked the first anniversary of the Fukushima Daiichi accident, the magnitude of TEPCO’s financial woes was growing. The plunge in the company’s stock price had erased almost $39 billion in market value, according to one analysis. Without an infusion of cash, the utility—which employed 38,000 people and supplied electricity to about 45 million, including those living and working in the world’s largest city—almost certainly would collapse.
Private lenders and institutional investors were wary, wanting the government to craft a rescue. No one could say with any certainty just how much this all was going to cost. Rumors that the government was going to nationalize TEPCO were initially rebuffed by Trade Minister Yukio Edano. But an intervention of some sort increasingly seemed to be the government’s option of choice—and TEPCO’s only hope.
The utility’s leaders remained defiant, asking Tokyo for money but rejecting any government say in company operations. Leading the fight to keep TEPCO under the control of insiders was its chairman, Tsunehisa Katsumata, one of Japan’s best-connected business leaders. Although Katsumata planned to step down in a show of responsibility for the accident, he argued that only TEPCO executives knew how to run the company. Edano countered that TEPCO’s corporate culture “hasn’t changed at all” and that new management was necessary.
Some economists and energy experts saw TEPCO’s dire predicament as a golden opportunity to restructure Japan’s antiquated energy supply system by breaking up utility monopolies and introducing competition. “Since the 1980s the utilities have looked more like bloated government departments than red-blooded businesses,” a writer for The Economist noted.
Unlike energy markets in the United States and elsewhere, in which generation and distribution had been separated, opening the way for competition, in Japan the ten regional power companies held total monopolies on all aspects of energy supply. The result was reliable service but at a very high price. The monopolies were extremely lucrative for the utilities.3 An analysis by Bloomberg News found that the ten of them earned $190 billion in annual revenues from generating, transmitting, and distributing power. Shattering that stranglehold, some Japanese academics and international analysts believed, could open markets, reduce rates, give renewable energy a toehold, and possibly lessen Japan’s need for nuclear energy.
To critics of the status quo, the months following the accident had provided some hope that change was possible. During the summer of 2011, the government had imposed power restrictions on large corporate users. Voluntary conservation efforts had been surprisingly successful. Electricity consumption during steamy August had dropped by about 11 percent. The usual chill of air conditioning was gone, as were coats and ties. Some manufacturing operations moved to off-peak nights and weekends. Even some night baseball games were switched to daytime. That led to speculation that reduced consumption could become the norm and there would be no need to restart the reactors. The nation stood at a crossroads, activists argued, needing only visionary leadership to map out a new energy policy.
But those hopes gradually faded as it became clear that Japan, still struggling to recover not only from a nuclear disaster but from a massive natural disaster, was unable or unwilling to take on such a challenge. Restructuring the electricity distribution system was not a priority. Keeping TEPCO alive was, however.
In late March 2012, TEPCO requested $12 billion (1 trillion yen) from the government to stay afloat. The price, as company officials knew, was the end of their independence; the government would take over control of the utility.4 Breaking with the utility’s long tradition of promoting executives from inside, the government brought in Kazuhiko Shimokobe, a bankruptcy lawyer and turnaround specialist, to be TEPCO’s chairman. Shimokobe, who had been running the government-backed TEPCO bailout fund, would handpick the new president. “This is the last chance to restore TEPCO,” he grimly told reporters.
The ten-year bailout plan approved by the trade ministry in early May provided $12.5 billion in government capital in exchange for more than 50 percent of the voting shares of TEPCO, with the right to increase that percentage to two-thirds if the utility failed to institute major reforms. In addition, TEPCO had to agree to a cost-cutting plan and other changes. All sixteen directors would resign and be replaced by a new board, the majority of whose members would be from outside TEPCO. The new president would be not an outsider, as some had hoped, but Naomi Hirose, a TEPCO managing director who held an MBA from Yale University.
TEPCO’s new management had to face a formidable challenge: a $9.78 billion loss for the fiscal year that ended in March 2012. A key step to move the utility back toward solvency was the restart of its seven reactors at the Kashiwazaki-Kariwa plant, three of which had been idle since the 2007 earthquake. “[A]ny plan that does not include nuclear energy would be nothing more than a pie-in-the-sky blueprint,” said Shimokobe, who along with Hirose was slated to officially take over following shareholder approval in late June.
By late June, when Japan’s power companies held their annual meetings, it was evident that TEPCO wasn’t the only utility opposed to a nuclear phaseout. Shareholder proposals to reject nuclear power were soundly voted down at all the meetings. Unsurprisingly, the utilities’ main institutional investors—life insurers and banks—voted with the company managements on this issue. The status quo seemed to them a safer bet. In the end, stockholders approved the bailout plan and the ongoing commitment to nuclear power.
Indeed, the recovery plan barely mentioned any energy strategies beyond restarting the utility’s nuclear plants. The influential Asahi Shimbun editorialized that TEPCO was getting off too easily. The utility should be forced into bankruptcy and the company’s shareholders and creditors should be “made to pay the price for their own mistakes.” Only then would it be right to tap the Japanese public for help in a recovery.
As of May 6, 2012, Japan had no operating reactors. Without them, the system was shy of roughly fifty gigawatts of generating capacity—about what Tokyo consumes during peak periods. With no nuclear power in the mix, Japan would require an additional three hundred thousand barrels of oil every day, along with an annual import of 23 billion cubic meters of natural gas to meet electricity demand, according to International Energy Agency estimates. (The cost of this imported fuel was expected to more than double residential electricity bills across Japan and further hobble the nation’s troubled economy.)5
Although the media had spent months speculating about a Japan without nuclear power, others never doubted that the reactors would eventually restart, given the depth of institutional support for nuclear energy. On March 23, the Nuclear Safety Commission ruled that the stress tests performed on Ohi Units 3 and 4 were satisfactory. And on April 13, Noda announced that the two Ohi reactors could safely resume operation. All that remained was the approval of local officials, no longer a sure thing for those who saw the devastation Fukushima had brought to nearby communities.
This rush to fire up the reactors made no sense to many in Japan. The accident at Fukushima Daiichi was still being investigated and many critical questions remained unanswered. The current regulatory system had clearly proven itself inadequate, yet the creation of a new agency to replace the discredited NISA was tied up by political infighting. For now, safety matters remained in the hands of NISA and the NSC—the same two agencies that had said Japan’s reactors were failure
proof. If restoring public trust was the government’s top priority, many asked, what was the rush? Why not await creation of the new safety agency and give it the authority to develop its own criteria for restarts?
Adding to worries was the release of new seismic data showing that a large portion of western Japan, including Tokyo, was vulnerable to earthquakes nearly twice as large as what the government had projected just nine years earlier. Coastal areas along this same part of Japan also were found to be vulnerable to tsunamis of thirty-two feet (ten meters) or more, three times higher than previous projections. The area around the Hamaoka nuclear plant, southwest of Tokyo, could be hit by a tsunami of sixty-eight feet (twenty-one meters), far above previous predictions. Unlike remote Fukushima, this region was densely populated.
The data also identified previously unknown and potentially active faults located in areas near or even directly underneath, Japanese reactors, including Ohi. Even when presented with the new seismic information, the utilities and government dismissed the potential hazards as exaggerated, without documenting their claims.
“[I]s it really possible to ensure the safety of operating these reactors while the possibility of active faults lying beneath them cannot be ruled out?” the Asahi Shimbun asked in an editorial. “The government owes the public a clear and convincing answer to this question.”
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The Ohi nuclear plant sits along Japan’s scenic west coast, about sixty miles northeast of Osaka, Japan’s third-largest city. Comprising four pressurized water reactors, the plant is owned by Kansai Electric Power Company (KEPCO), which relies on nuclear power for almost half its generating capacity, more than any other Japanese utility. Ohi Units 1 and 2 are older PWRs with ice-condenser containments that are smaller and weaker than the large, dry containments at Units 3 and 4. Perhaps for that reason, KEPCO proposed restarting only Units 3 and 4 at first.
In many respects, Ohi served as an ideal test case for both those promoting and those opposing the restarts. The plant is in Fukui Prefecture, home to a total of thirteen reactors. The local economy was heavily dependent on the jobs, tax revenues, and generous perks provided to local communities by utilities doing business there. Some of Japan’s largest manufacturers, including Sharp Corporation and Panasonic, are KEPCO customers. The possibility that they and others might move operations offshore if uncertainty regarding energy supplies continued was a clear concern in Tokyo.
Despite their economic benefits, not all neighboring communities were eager to see the Ohi reactors returned so quickly to service. Having a nuclear neighbor once seemed attractive to nearby towns, but that was before they had witnessed the consequences of an accident—the depopulation of a large region, widespread contamination, health risks, uncertainty about a return to normal life. At the height of the restart debate, the government announced that 18 percent of all Fukushima evacuees—including those as far as thirty miles away—might not be able to return to their homes for ten years because of radiation levels.
As a result, some argued that if communities tens or even hundreds of miles away were vulnerable to nuclear plant accidents, they too should have a say in the plants’ operation. And the calculus might be different for such communities, since they would be exposed to the risks without receiving any of the benefits. That was something new in Japan.
One of the most outspoken restart critics was Toru Hashimoto, the brash young mayor of Osaka, whose city was Ohi’s largest customer and also the largest shareholder in KEPCO. Hashimoto argued that the government was prematurely pushing the restarts at the expense of public safety, a contention that catapulted him into the national spotlight and earned him a large following. Dissatisfied with Tokyo’s assurances that the plant was safe, Hashimoto set up his own panel of experts, who took issue with the adequacy of the stress tests. That prompted governors of two nearby prefectures to demand a more thorough inquiry into Ohi’s safety before Units 3 and 4 were returned to service.
Critics noted that the stress tests represented just the first phase of what was supposed to be a multipart safety response to the Fukushima accident. Additional measures—construction of higher seawalls, better protection against earthquake damage, improved emergency planning, filtered venting systems—could take years to complete. In the meantime, however, the plants would be operating.
With opposition from local officials and weekly demonstrations in the capital threatening to derail plans for a quick restart at Ohi, Prime Minister Noda stepped up the rhetoric. “Japanese society cannot survive” without the reactors, he warned on national television. And he offered assurances that the government would “continue making uninterrupted efforts” to improve nuclear safety.
The growing pressure from Tokyo and Japan’s business community had its effect. Local government opposition to the Ohi restart faded, with officials, including Hashimoto, agreeing to a “limited” restart at least through the summer months.
On June 16, the Noda government officially gave the go-ahead to restart Ohi Units 3 and 4. Trade Minister Yukio Edano acknowledged public opinion polls were running solidly against the restart. “We understand that we have not obtained all of the nation’s understanding.”
That was evident six days later, when an estimated 45,000 people protested the decision outside the prime minister’s office; thousands of demonstrators also rallied in Osaka and elsewhere. The following Friday, an even larger protest massed in the capital near the prime minister’s office. As he left for the day, Noda shrugged off the protesters. “They’re making lots of noise,” he told reporters before heading home.
It would take several weeks for the two Ohi reactors to be brought fully into service, in time to meet what the government had predicted would be a 15 percent shortfall in energy supplies in western Japan during the hottest days of summer. On July 16, with temperatures above ninety degrees, tens of thousands of people clogged central Tokyo protesting the restart. Whether the giant demonstration would have any effect on Japanese energy policy was uncertain. But the crowd, waving banners and holding up signs, made clear that it was time that the public had a say in those decisions. As a marcher told a reporter, “It’s just a big step forward to start raising our voices.” Despite the protests, in September the government authorized their continued operation.
• • •
In the United States, those who had hoped for change also were feeling frustrated. Among them was the NRC’s Gregory Jaczko.
Shortly before leaving his job as chairman in July 2012, Jaczko offered a candid observation to a Washington audience of energy insiders: “I used to say the one thing that kept me up at night was the thing we hadn’t thought of. Today, the things that keep me up at night are those things we know we haven’t addressed.”
It had been a year since the NRC’s Near-Term Task Force had made its recommendations on a plan of action, including far-reaching structural reforms. But the slow pace of actual reform bothered Jaczko.
Although many details of the Fukushima Daiichi accident were still being analyzed around the world, its most obvious lessons were clear. Nevertheless, the NRC, bolstered by the task force’s statement that the U.S. nuclear fleet did not pose an “imminent risk” to public health and safety, ultimately elected to water down the most pressing recommendations and to slow-walk the others. Just as in the aftermath of Three Mile Island, it appeared that the NRC might be pulling its punches in the face of industry resistance.
In a July 2011 letter to the commission, Marvin Fertel, president of the Nuclear Energy Institute, had thrown down the gauntlet. While conceding that “the industry agrees with many of the issues identified by the task force,” he cautioned that “the task force report lacks the rigorous analysis of issues that traditionally accompanies regulatory requirements proposed by the NRC. Better information from Japan and more robust analysis is necessary to ensure the effectiveness of actions taken by the NRC and avoid unintended consequences at America’s nuclear energy facilities.” The industry
appeared to be stalling—demanding further study in the belief that the passage of time would erode momentum for regulatory changes. It had certainly worked in the past.
The task force report also needed to pass muster with the rest of the NRC staff. Although the task force members were NRC personnel, they were operating as an independent body outside of the usual commission pecking order. Normally, safety rule changes evolved slowly within the agency, working their way up to the staff’s gatekeeper, the executive director for operations, a post held by Bill Borchardt.
But Chairman Jaczko wanted the commission to vote directly within ninety days on the task force’s twelve recommendations, rather than on the staff’s views of the report as filtered through Borchardt. Jaczko’s attempt to bypass senior management likely grew out of the increasingly rocky relations he was having at the NRC, not only with staff but also with his fellow commissioners, who could join to outvote him. (Jaczko would eventually accuse the majority of favoring policies that “loosened the agency’s safety standards.”) For their part, the other commissioners expected to also receive the staff’s opinions of the report, perhaps broadening their understanding or offering alternatives.
Borchardt and his deputy, Marty Virgilio, believed that the commissioners should receive a “wide range of stakeholder input” before making any decisions on the task force’s recommendations. They attached a five-page memo to the task force report making this suggestion. The memo also emphasized that U.S. nuclear power plants were unlikely to experience the same problems as Fukushima had.
Fukushima: The Story of a Nuclear Disaster Page 30