Saturday, October 1, 2011

01/10 TEPCO compensation predicted to reach 4.54 tril. yen

The Yomiuri Shimbun

Tokyo Electric Power Co. will have to pay an estimated 4.54 trillion yen in damages over the two-year period following the outbreak of the disaster at its Fukushima No. 1 power plant, according to a government panel scrutinizing the utility's financial standing in connection with compensation payments.

According to a draft of a final report compiled by the Study Committee on Tokyo Electric Power Co.'s Management and Financial Conditions, TEPCO should cut 2.41 trillion yen in personnel and other business costs over the next 10 years, about double the amount projected in business restructuring plans TEPCO has submitted to the government.

Chaired by lawyer Kazuhiko Shimokobe, the panel will officially announce the report after presenting the final draft to Prime Minister Yoshihiko Noda on Monday at the earliest, The Yomiuri Shimbun has learned.

In reference to the utility's cost-cutting efforts, the panel says in the draft that TEPCO is believed to have set its electricity rates higher than the actual cost of producing it, leading to higher power bills than in other countries.

The study panel's report is designed to serve as a basis for devising a program for TEPCO's special operational plans, which are to be compiled as a precondition for the utility to seek assistance from the state-backed Nuclear Damage Compensation Facilitation Corporation over massive compensation payments necessitated by the nuclear crisis, panel officials said.

The draft report divides damages payments into three major categories:

-- Damage caused by government evacuation orders.

-- Damage due to radiation fears.

-- Indirect damage suffered by business partners.

The estimates are based on the premise that the problems of at least 150,000 evacuees will continue for two years from the outbreak of the Fukushima disaster.

Compensation for damage related to evacuation orders is estimated at 577.5 billion yen, on the assumption that evacuees have completely lost the value of their land, buildings and other properties.

Damage to business operations and job losses also are included in this category, bringing its total to 1.92 trillion yen.

Compensation for losses by such people as farmers and tourist companies due to radiation fears has been estimated at 1.3 trillion yen.

On the business restructuring plans worked out by TEPCO to secure funds to cover part of the compensation payments, the draft report says the company's cost-cutting goal of 1.18 trillion yen over the next 10 years should be doubled to 2.41 trillion yen.

The company's electricity generation costs can be reduced significantly by such efforts as ending inefficient procurement of equipment through TEPCO's affiliated firms, according to the draft.

The panel calls for a review of the utility's current formula of calculating power bills, which is called the cost-plus pricing system. It allows TEPCO, like other power utilities, to pass on power generation costs, such as personnel and fuel costs, plus a certain margin, to consumers.

The power generation costs declared by TEPCO when deciding on power bills have totaled 618.6 billion yen more than actual spending in the past decade, the draft says, and it calls for improved methods of calculation.

(Oct. 1, 2011)

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