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April 16, 2012

[SSJ: 7381] Re: A couple of reasons why the electricity has kept flowing despite the nuclear shutdowns

From: Richard Katz
Date: 2012/04/16

Jun Okumura wrote:

Note that the Act on Compensation
for Nuclear Damage (Act No. 147 of 1961) may not have a cap on corporate liability but does have specific provisions that clearly anticipate the possibility of significant accidents: 1) 120 billion yen financial backstop for each establishment (not unit, so this has been another incentive for adding units to the same site); 2) government assistance when the liability exceeds the capacity of the utility in question; First, thanks for the correction/clarification. That's part of what makes SSJ so helpful.

Regarding point 2, the conditions of government assistance seem to be ambiguous, at least to me, despite the apparently clear words of the act. The act
(http://tinyurl.com/85y9rua) says that:


"Where nuclear damage occurs, the Government shall give a nuclear operator .... such aid as is required for him to compensate the damage, when the actual amount which he should pay for the nuclear damage pursuant to Section 3 exceeds the financial security amount [Y120 billion] and when the Government deems it necessary in order to attain the objectives of this act.
2. Aid as provided for in the preceding paragraph shall be given to the extent that the Government is authorised to do so by decision of the National Diet."


So, the aid is not automatic. The Diet must approve it, and the act does not specify what conditions, if any, the government can attach to such aid. Nor does this Act make clear (at least to me) the utility's liability if the Diet refuses to authorize the aid.

As for the series of financial injections under the Nuclear Damage Liability Facilitation Fund, I've seen press reports--which could be wrong--that TEPCO is obliged to pay back that money from future profits. But the specifics here are also unclear to me, especiallly if the govt turns that injection into 2/3 ownership of common shares. By the way, the act also says that, in case of bankruptcy, victims stand in line ahead of other creditors like banks.

As for the compensation cap, in the latest Oriental Economist, former Toyo Keizai editor Yoshisuke Iinuma
writes:

"For its part, the MOF feared that compensation would become the government's responsibility, creating a huge financial burden.
Thus MOF Vice-Minister Eijiro Katsu
and other bureaucrats made the rounds,
telling politicians the two things that it was essential to avoid. First, a cap on TEPCO's compensation responsibility, which would mean that its hidden debts would become the government's responsibility, due to political pressure to help the victims. Second, TEPCO's legal bankruptcy would shift its compensation responsibilities onto the government."

So, MOF appears to believe that there is no cap, despite the Y120 mandate for insurance and the provision that I cited above. That's why I say it's ambiguous to me.

Jun continued:

"and 3)
potential government declaration of force majeure, in which case the government will shoulder all responsibility once the 120 billion backstop is exhausted."

Edano long ago said that declaring force majeure was politically impossible. It would also raise a potential legal argument. TEPCO claims the culprit was the tsunami. But smart lawyers could easily argue that the culprit was TEPCO's failure to heed the advice of Fukushima plant manager Masao Yoshida who, years earlier, had urged a higher wall and had specifically cited the 869 tsunami. Had TEPCO built a higher wall, as was done at Onagawa, most of the damage would not have occurred. So, it was a foreseen risk against which TEPCO took no action. In such a suit, could a judge declare TEPCO negligent. If so, what would be the ramifications? I'm no lawyer, but it seems to me like a big can of worms that TEPCO would want to leave unopened.


Richard Katz
The Oriental Economist Report

Approved by ssjmod at 11:27 AM