The $64 billion question

“THIS is a war between humans and technology. While that war is being fought, we should not talk about bankruptcy.” So says a Japanese official responsible for channelling the first tranche of ¥5 trillion ($64 billion) in government support to Tokyo Electric Power (Tepco) following the meltdown of its three reactors at Fukushima Dai-ichi nuclear power plant after the tsunami on March 11th.

The support has two valid aims. It helps pay compensation to the 89,000 people forced to abandon their homes within a 20km (12.5-mile) radius of the plant: in the twilight zone only farm animals and the odd feral ostrich roam the streets (see article). It also spares Tepco the chaos of insolvency as it races towards a year-end deadline for Fukushima’s full shutdown.

Yet the aim must surely be to create a stronger, safer energy industry as well. Tepco’s continued existence as a private, gravely crippled entity works against that. The government should act fast to nationalise Tepco and hold it temporarily in public ownership as it clears out the old management and oversees the clean-up. Then it should reprivatise a thoroughly reformed utility. Three reasons argue for Tepco to be nationalised.

First, as a basis for holding the company to account. Despite failing to anticipate the devastating earthquake and tsunami, and a dismal performance after they hit, Tepco’s management remains broadly in place, and shareholders and creditors are being bailed out. Injecting money into the company smacks of the sort of complicity between the nuclear industry and its political overseers that helped get Japan into this nuclear mess. Though the ¥5 trillion will pass through Tepco’s hands, the company has no legal obligation to register it as a loan on its balance-sheet or say how it will be repaid. For now, taxpayers, not the shareholders or bondholders, bear all the risk.

Second, to ensure that Tepco’s financial restructuring is safe. The firm has agreed to cut costs by ¥2.5 trillion over the next ten years, but this may well compromise safety. Already there are reports of workers slopping about in radioactive water wearing leaky boots. In the short run the state can better oversee this transition as an owner with day-to-day responsibilities, before privatising Tepco in order to re-establish the necessary division between operator and regulator.

Third, as a demonstration that the government will no longer grant special favours to the nuclear industry. Failure to intervene would underline how Tepco, along with Japan’s other power utilities, continues to intimidate the government. The utilities have huge political power, helped by a pliant media and the support of big businesses selling services at inflated prices. If the government fails to discipline Tepco, it will struggle to win the country’s confidence over other aspects of nuclear oversight. That includes the promise by Yoshihiko Noda, the prime minister, to conduct “stress tests” to ensure that the rest of Japan’s 54 nuclear reactors, most of them now suspended, can safely be restarted.

At Fukushima, more bills will come due, including for removing radioactive topsoil from a vast area. The longer the government dithers over nationalising Tepco, the more the costs will rise and the impetus for action will wane. Tens of thousands have lost homes, businesses and confidence in their children’s health as a result of the disaster at Fukushima. Don’t let their suffering be for nought.