Shareholders of Tokyo Electric Power Co. formally decided on June 27 to put the utility under effective state control.
The decision at the annual shareholders meeting cleared the way for a new management team led by Chairman Kazuhiko Shimokobe and President Naomi Hirose to take the helm at the financially troubled company, known as TEPCO.
But TEPCO’s business plan to regain financial health, based on the assumption that it can restart idled reactors at its Kashiwazaki-Kariwa nuclear power plant in Niigata Prefecture, is seriously flawed and will need a fundamental revision at some point.
TEPCO in its revamped form needs to focus on making compensation payments to victims of the Fukushima nuclear disaster and restructuring its business operations in a way that anticipates the reform of the electric power market being considered by the government.
To tackle these challenges effectively, TEPCO needs to reform its corporate culture.
Under the government-approved restructuring plan, TEPCO will shift to an in-house “company system.” The utility’s different business divisions, such as thermal power generation, power transmission and distribution and other operations, will become semi-independent units.
With TEPCO preoccupied with dealing with the consequences of the Fukushima meltdowns, the reorganization is aimed at making it easier for the utility to operate its businesses jointly with potential partners, such as new power suppliers and investment funds.
TEPCO’s new structure makes sense given the separation of power generation and transmission and other key elements of the envisioned power market reform.
Since it receives taxpayer money, TEPCO needs to make exhaustive efforts to improve its efficiency and ensure full disclosure of financial and other relevant information about its individual units, such as cost data.
Above all, the new management team should be aware that the public is keenly watching its performance, trying to assess its commitment to reforming the utility.
During the year and three months since the disaster at the Fukushima No. 1 nuclear power plant, TEPCO has shown few encouraging signs of mending its ways. There have been serious delays in negotiations over compensation to victims of the accident. The utility’s explanations about its plan to raise power rates have been grossly insufficient. The report on its investigation into the accident was all about shuffling responsibility onto others.
The private-sector panel that looked into the accident cited TEPCO’s complacency due to its market monopoly, its highly compartmentalized business structure and its traditional tendency to cover up problems as factors behind the accident.
That is not to say there have been no signs of change among individual employees and workplaces of the utility.
The company’s potential for change was apparently stifled by the old management team, which concentrated its thoughts and energies on self-defense.
The attitude of top management is vital for the reform. The role of the new president, Hirose, an insider who has been promoted to the post from his previous position as a managing director, is particularly important.
A new management reform task force will be created as a team of about 30. Half of the members will come from the Nuclear Damage Liability Facilitation Fund and the other half will be TEPCO employees.
The government-supported fund was created to help TEPCO pay compensation to victims of the nuclear disaster.
The task force should be staffed mainly by reform-minded middle-rank and young employees and highly motivated outsiders so that it can spearhead TEPCO’s reform drive.
The government will be by far the largest shareholder of TEPCO and a provider of huge amounts of funds for the utility.
At the same time, the government, which has been promoting nuclear power generation, shares the responsibility with TEPCO for dealing with the consequences of the accident.
Considering the tremendous amounts of funds needed for paying compensation and decontaminating areas polluted by radiation, the current financing framework, under which TEPCO is required to pay back the money supplied by the government over a long period, is just a fantasy.
Keeping TEPCO alive would hamper policy efforts to revitalize the power market.
The government needs to confront the inevitability of putting a heavy financial burden on the public for cleaning up the mess and embark on serious efforts to create a new framework for tackling problems with TEPCO and overhauling the nation’s power supply system.
--The Asahi Shimbun, June 28
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