Power industry unions donate over 100 mil. yen to DPJ
TOKYO (Kyodo) -- The ruling Democratic Party of Japan received over 100 million yen in donations in the three years through 2009 from political groups formed by workers' unions of electric power companies, a Kyodo News survey showed Sunday.
With power company executives already known to have provided large contributions to the main opposition Liberal Democratic Party, the union funding shows that both the labor and management sides of the industry have sought to maintain their clout with the country's two top political parties.
The power industry's labor groups provided at least 111 million yen to the DPJ headquarters as well as 33 parliamentarians including Katsuya Okada, former party president and current secretary general, and former science minister Tatsuo Kawabata between 2007 and 2009, according to publicly available political fund reports.
Current and retired executives of electric power companies were already found to have provided 162 million yen in political donations during the same three-year period to the LDP, which lost power in 2009.
The labor unions mobilized their funds to support the DPJ while the management backed the LDP to achieve the common goal of securing political endorsement for nuclear power as an important energy source.
The 220,000-strong Federation of Electric Power Related Industry Worker's Unions of Japan, known as Denryoku Soren, has deepened ties with the DPJ since before the party wrested power from the LDP in 2009.
One source in the federation said the labor group provided the funds to politicians who supported nuclear power as an energy source to ensure stable electricity supplies.
Denryoku Soren is formed by workers' unions at 10 regional electric power companies, two power wholesalers -- Japan Atomic Power Co. and Electric Power Development Co. -- and electric power-related firms.
A DPJ panel on energy in 2006 put forth a new energy policy proposal stating that nuclear power is an indispensable energy source, marking a turnaround from the party's previously cautious stance on nuclear energy.
DPJ upper house member Masashi Fujiwara, who once belonged to the federation said in the union's newsletter in 2007 that the labor group's approach to the party played a key role in encouraging the policy shift.
The DPJ's pro-nuclear stance was later reflected in its campaign promises for the 2009 election.
Wednesday, September 7, 2011 Tepco To Contribute Y2.37bn To Compensation Body
TOKYO (Nikkei)--Tokyo Electric Power Co. (9501) will contribute 2.37 billion yen to an entity to be set up to compensate the victims of the accident at its Fukushima Daiichi nuclear plant, it was learned Wednesday.
Kansai Electric Power Co. (9503) and 10 other utilities, including Electric Power Development Co. (9513), or J-Power, will provide 4.62 billion yen.
The government will chip in 7 billion yen shouldering half the total 14 billion yen for the organization. It will be up and running by the end of the week.
The shares of the contributors were determined based on each company's total power output from nuclear power plants.
The money will be used to fund the entity and pay for staff.
The utilities will also make separate contributions to pay for compensation, in addition to funding the organization.
The largest amount of funding will come from Tepco, followed by Kansai Electric, which will contribute 1.22 billion yen, and Kyushu Electric Power Co. (9508), which will give 660 million yen.
J-Power and Japan Nuclear Fuel Ltd. will pay in about 100 million yen each.
08-09-2011, 07:57 AM (This post was last modified: 08-09-2011, 08:00 AM by Thriftville.)
Yeah that's true... I would predict that the amount runs up to billions of USD. But from this report, seems like government is willing to help again, by setting up a 2nd entity to help TEPCO, then inject 7b Yen. Furthermore, 10 other power company also come to rescue. The Jap gov plans to nationalized the cost of disaster.
This mimics the situation in Australia, where employee's income tax is up by 1% to help pay for Queensland flood.
09-09-2011, 09:20 AM (This post was last modified: 09-09-2011, 09:21 AM by Thriftville.)
Wednesday, August 10, 2011 Tepco Seeks To Avert Nationalization With Accounting Gimmick
TOKYO (Nikkei)--Despite the massive burden of compensating victims of the nuclear disaster, Tokyo Electric Power Co. (9501) is looking to remain a private-sector company by using government financial aid to avoid falling into a negative net worth.
Tepco President Toshio Nishizawa announces the firm's earnings at a press conference.
Many industry analysts, however, say that because the plan depends on state funds, it is merely a temporary fix and therefore does not ensure the firm's long-term viability.
Tepco, operator of the crippled Fukushima Daiichi nuclear plant, said Tuesday it intends to classify the money it receives from the government as profits and assets in its books. This way, the company will be able to prevent its liabilities from exceeding its assets, according to a plan unveiled by President Toshio Nishizawa and other Tepco officials.
In other words, the utility will be able to avoid being nationalized -- a fate that many observers predicted would befall the company following the plant disaster.
Balancing act
Under Tepco's accounting scheme, the funds it receives from the new entity to help it pay compensation will be reported as accounts receivable in the asset column of the balance sheet. On the income statement, the money will be shown as special profits.
Even though its reserves to cover compensation claims, to be booked as liabilities, will keep growing, they will be "balanced" with the assets because the total Tepco receives from the entity will increase accordingly, Nishizawa explained. That means shareholder capital will not be impaired by the company's compensation payments.
Immediately after the nuclear crisis broke out in March, many policymakers in the government and the ruling Democratic Party of Japan talked about the possibility that Tepco might be nationalized, and the company's employees began bracing for that prospect. But Tepco Chairman Tsunehisa Katsumata vowed to make a "maximum effort" to keep the company in the private sector.
The outlook for Tepco's fate changed significantly when Prime Minister Naoto Kan announced his intention to step down in June, lessening some of the political attention being focused on the utility.
Despite its status as a public utility under tight government regulation, Tepco has a long tradition of taking pride in operating as a private-sector company that dates back to the early 1950s. Japan's electric power industry was put under state control as the nation entered World War II and remained that way for years into the postwar era.
Independent streak
The foundation of today's electricity supply system was laid by Yasuzaemon Matsunaga (1875-1971), an electric power industry tycoon active before and after the war. Matsunaga championed the privatization of the electric power business as chairman of a government council on restructuring the industry.
He was instrumental in the 1951 establishment of the network of nine regional utilities operating as private-sector power suppliers. The network did not include Okinawa Electric Power Co. (9511) because Okinawa was still under U.S. control at the time.
The mind-set based on Matsunaga's management credo, which stressed the importance of not relying on the government, also influenced the power industry's move in the late 1950s to introduce nuclear power under the private sector's initiative. The move triggered a bitter controversy involving the political, bureaucratic and business communities, but ended with the establishment of the Japan Atomic Power Company in 1957, a victory for the power industry.
Dependent on aid
Many industry analysts, however, question Tepco's claim that the accounting gimmick concerning public financial aid will secure its long-term viability as a private-sector company. Even if the utility manages to avoid being owned by the government, the fact will remain that Tepco's survival depends on money from the government. The company's fate is in the government's hands.
In addition, it is not clear whether the new entity will also cover the huge costs of dealing with the accident. One analyst said the only way for Tepco to survive in its current form is to carry out a combination of thorough restructuring and rate hikes.
For those who like crisis stocks, Tepco is a good option... because ah gong will give free lunch...
Tepco Gets $12.8 Billion Bailout
By MITSURU OBE And KANA INAGAKI
TOKYO—Tokyo Electric Power Co. will receive about ¥1 trillion ($12.81 billion) in public funds to help it bear the weight of compensation claims from the Fukushima Daiichi crisis, as the utility said it expects to go deep into the red for this fiscal year.
The Japanese government on Friday approved ¥890 billion in financial assistance for the company, known as Tepco, with another ¥120 billion coming from the country's existing nuclear damage compensation act.
The tsunami-crippled No. 3 reactor of Tepco's Fukushima Daiichi Nuclear Power Station
With the aid package in place, expected to be the first of many over the coming years aimed at preventing cash shortages or capital deficits at Tepco, the company said it now expects a net loss of ¥600 billion for the fiscal year through March, releasing a full-year earnings outlook for the first time this year.
The first half net loss compared with a year-earlier profit of ¥92.29 billion. For the April-June quarter, the company logged a net loss of ¥571.76 billion, while it posted a net loss of ¥1.387 trillion during the January-March quarter.
In addition to cleanup costs, the company is scrambling to cope with an increase in fuel costs as it relies more heavily on expensive thermal power to make up for the lost electricity generation from its nuclear plants.
Earlier in the day, the government agreed to provide some ¥1 trillion in public funds to help the utility pay for compensation claims to people and businesses affected by the nuclear disaster triggered by the March 11 earthquake and tsunami.
The amount includes ¥120 billion to be provided under the existing nuclear damage compensation act. The remainder will be provided by the Nuclear Damage Liability Facilitation Fund, a public-private body set up in September to support compensation payments in nuclear accidents.
An independent government panel predicted last month that compensation expenses alone could reach ¥4.5 trillion over the next two years, and could increase further.
As a result of the bailout, Tepco will be placed under greater government oversight. A management reform commission, composed of executives from Tepco and officials from the bailout fund, will be set up to monitor the implementation of cost-cutting measures.
The government also approved a plan that entails major restructuring on Tepco's part, which had been a precondition for the embattled utility to receive a taxpayer bailout.
The plan calls on the utility to reduce operating expenses by ¥237.4 billion in the current fiscal year and complete sales of securities holdings worth ¥300 billion by the end of March and real estate holdings worth ¥247.2 billion within three years.
The provision of public funds is expected to be only the first of many installments to come over the coming years. An independent government panel predicted last month that compensation expenses could reach ¥4.5 trillion in just two years, and could increase more.
As well as the full-year net loss forecast, Tepco said it also expects an operating loss of ¥305 billion on revenue of ¥5.315 trillion.
For the April-September period, the utility swung into an operating loss of ¥60.60 billion from a profit of ¥235.81 billion in the same period a year earlier on revenue of ¥2.503 trillion, down 7.7% from ¥2.711 trillion.
Tepco doesn't provide earnings figures on a quarterly basis.
RBM, I'm puzzled why the Tokyo city government wants to build new power plant to challenge Tepco? aren't they under the same camp?
Hope to hear your views.
Utility Reform Eluding Japan After Nuclear Plant Disaster
TOKYO — In a direct act of rebellion against Tokyo Electric Power Company, which owns the crippled Fukushima nuclear plant, the local government in Tokyo is moving swiftly to build a huge natural gas facility that would generate as much electricity as a nuclear reactor.
The plant would ensure a stable supply of electricity for the capital in the aftermath of the nuclear meltdowns in March at the Fukushima Daiichi plant. But more important, the city government says, it could spur desperately needed change in Japan. By weakening Tokyo Electric, or Tepco, reformers hope to finally break the linchpin of the collusion between business and government that once drove Japan’s rapid postwar rise, but that now keeps it mired in stagnation.
¶ “Now’s our chance,” said Naoki Inose, Tokyo’s vice governor, invoking an ancient proverb about attacking a wild dog only after it has fallen into a river: “On March 11, Tepco became the dog that fell into the river. Only then can you fight against such a formidable foe.”
¶ So formidable a foe, in fact, that just eight months after Japanese leaders vowed the nuclear disaster — like the end of World War II — would lead to a kind of rebirth, the chances for fundamental change are rapidly slipping away.
¶ Already, the reformers have lost a crucial ally: Naoto Kan, who as prime minister had called for an end to nuclear power and major changes to the power industry. He was eased out of office with the help of Japan’s most powerful corporate lobby, a faithful Tepco supporter that, like many members of Japan’s establishment, has benefited from the company’s largess.
¶ And Mr. Kan’s successor, Yoshihiko Noda, whose party came to power promising to build a new Japan, instead joined the old guard to rally around nuclear power, and Tepco.
¶ “In the early months after the accident, I thought there was a real chance for change, but now the move to turn Fukushima into an opportunity for radical reforms is losing steam,” said Hiroshi Okumura, an economist and the author of “Dismantling Tepco.” “There’s a very big risk that Japan’s lost decade, which became the lost 20 years, will now become the lost 30 years.”
¶ It is difficult to overstate the influence of Tepco, which rivals the American defense industry in its domestic reach.
¶ Thanks to a virtual monopoly and a murky electricity pricing system, it has become one of the biggest sources of loosely regulated cash for politicians, bureaucrats and businessmen, who have repaid Tepco with unquestioning support and with the type of lax oversight that contributed to the nuclear crisis.
¶ The pockets of insurgency against Tepco are being led by politicians like Mr. Inose, who successfully took on the nation’s road construction monopoly a few years ago; a team of bureaucrats who lost power after an earlier aborted attempt at energy deregulation; and some of Japan’s most innovative businessmen.
¶ Arrayed against them are the interests that have long profited from the virtually unchallenged hold on the market enjoyed by the company and the nation’s nine other utilities. The corporate lobby, the Japan Business Federation or Keidanren, came out clearly against deregulation, leading to a public clash with one of its highest-profile members, Hiroshi Mikitani, an entrepreneur whose 14-year-old company, Rakuten, has grown into Japan’s largest online shopping mall and is rapidly expanding overseas.
¶ Over Twitter, Mr. Mikitani, 46, said the utilities’ “monopoly and the collusion among politicians, bureaucrats, businesses and the news media” were preventing deregulation.
¶ In leaving Keidanren, the business federation, he accused it of furthering Japan’s “Galapagosization” — a neologism signifying Japan’s growing tendency to turn inward, relying on a shrinking home market as it fails to compete globally.
¶ Supporters of the power industry argue that deregulation will only hurt the country, blaming it for causing blackouts in countries like the United States with deregulated markets.
¶ “The revolutionaries feel it’s fun to smash existing things,” said Yosuke Kondo, a lawmaker and a former deputy minister in the Ministry of Economy, Trade and Industry, which oversees the energy sector. “Why do they feel the need to smash something that we can boast to the world about?”
¶ The clearest sign yet that Mr. Kondo and his allies appear to have the upper hand was a recent government decision to inject $11.5 billion into Tepco, the first of many payouts needed to keep the company afloat and help it compensate the 90,000 people forced to flee areas near Fukushima Daiichi.
¶ The bailout, which protects Tepco’s shareholders and creditors, will almost certainly require raising electricity rates. So far, the government has asked very little in return.
¶ “I think the chances are seven to three that Tepco wins and survives completely unchanged,” said Tatsuo Hatta, an economist and supporter of deregulation. “If there’s another tsunami and another nuclear plant gets destroyed, then they’re 50-50.”
¶ Costly for Consumers
¶ Government policies are at the heart of Tepco’s power.
¶ Japan, almost alone among industrialized nations, has not deregulated its energy grid, so utilities have a stranglehold on both the generation and the transmission of electricity. What is more, power companies are allowed to set electricity rates according to a complex system that includes a vast range of often unclear expenses. The more a utility spends, the more it can charge.
¶ The policy, which was meant to further a national strategy of developing nuclear power, had the predictable effect of encouraging Tepco to overspend, according to a 230-page report released last month by a government panel investigating Tepco’s management. The panel found that Tepco — whose net income was $1.7 billion in 2009 and whose 192 plants powered a third of Japan — had a vast network of related companies to which it doled out inflated contracts. Some of those companies, in turn, arranged deals with large manufacturers, allowing them a share of the wealth.
¶ “It’s an incredible system,” said Kaichiro Shimura, the author of “The Tepco Empire” and a former newspaper reporter who covered Tepco. “The only losers are the consumers.”
¶ Japanese, in fact, pay on average double what Americans do for electricity.
¶ Perhaps worse, critics say, Tepco became Japan’s biggest “cash box.” Besides paying inflated costs to other members of Keidanren that provided it with equipment or services, the company donated copious amounts to political fund-raisers, made generous donations for academic research and bought advertisements in the news media, even though it had no real competitors. Tepco also offered lucrative postretirement jobs to bureaucrats from government ministries and the national police.
¶ In return, few challenged Tepco’s practices, even as it became the main player in Japan’s nuclear establishment, known as the “nuclear power village.”
¶ “Tepco lies at the center of collusion,” said Takeshi Sasaki, the former president of the University of Tokyo. “You can’t reform the nuclear power village without first fixing Tepco.”
¶ In an interview, Toshio Nishizawa, Tepco’s chief executive, waved away such suggestions that his company had outsize influence.
¶ “I’ve worked at Tepco for a long time, and it’s just not the case that we control this or that,” he said. “We don’t have that kind of power.”
¶ Out to Break Monopolies
¶ Early this month, in a northern town called Obihiro, a construction crew broke ground on a solar farm that could grow into a full-fledged revolt against Tepco and other utilities.
¶ The farm is the first of many that Masayoshi Son, the chief executive of Softbank, the telecommunications giant, wants to build across Japan. A decade ago, Mr. Son, Japan’s richest man and widely regarded as its most iconoclastic business leader, broke the monopoly of Nippon Telegraph & Telephone.
¶ To loosen the utilities’ grip on the power grid, he has won the backing of the governors of 33 of the 47 prefectures, who appear to be responding to growing popular sentiment against nuclear power.
¶ That is what Tokyo is trying on a smaller scale with its natural gas plant, which city officials say will yield enough electricity to power its subway system and light many public buildings.
¶ “At the very least, we should achieve some measure of reform,” Mr. Inose said. “Of course, because there are so many vested interests, it won’t be possible to solve everything.”
¶ Indeed, Mr. Inose remains cautious about pursuing what many regard as the holy grail of deregulation: separating power generation and transmission, which would automatically create more companies and competition.
¶ A previous failed attempt at change is often cited as evidence of the control wielded by Tepco and its allies. In the mid-1990s, after most industrialized nations split the two halves of the business, a small group inside the Economy Ministry tried to do the same.
¶ Tepco and the other utilities pushed back fiercely. They reached out to the then-governing Liberal Democratic Party, said Taro Kono, a lawmaker in the party and one of its few critics of nuclear power. Tepco and Keidanren handpicked a former Tepco vice president, Tokio Kano, for one of the legislative seats the party reserves for Keidanren, and he helped quash the ministry renegades.
¶ Keidanren declined to make any of its officials available to comment for this article. Tepco’s chief executive, Mr. Nishizawa, said keeping generation and transmission united was best for a stable power supply.
¶ With no political support, the ministry group, led by an official named Seiji Murata, had no chance.
¶ “Murata’s people were pushed out in a coup d’état,” said Yoshio Shioya, who has written extensively on nuclear issues.
¶ Then came the Fukushima disaster. One of Mr. Murata’s top lieutenants, Satoshi Kusakabe, was charged with drafting a new energy policy by next summer. Mr. Kusakabe, working for the Cabinet Office, has brought back two allies from a decade ago to press forward with the separation of generation and transmission despite opposition from the ministry.
¶ But it is unclear how much power Mr. Kusakabe’s team, which was appointed by the former prime minister, really has. Some experts say that, to placate critics of the industry and nuclear power, the government may simply mandate changes with little effect — as happened a decade ago.
¶ An Attempt to Open Up
¶ On paper, much of Japan’s power industry has been deregulated in the past decade. The emptiness of that deregulation, which has become increasingly evident since the Fukushima disaster, underscores the difficulties faced by current challengers.
¶ The history makes clear that though the protection of Tepco and the industry began under the long-serving Liberal Democrats, it has continued under the Democratic Party of Japan, which grabbed power in 2009 with promises to untangle the ties between business and government.
¶ In one effort to break the utilities’ virtual monopolies, 60 percent of Japan’s electricity market was opened up by 2005 to so-called power producers and suppliers, companies that act as brokers, buying electricity (mostly from manufacturers that generate their own) and selling it to commercial customers. A market, the Japan Electric Power Exchange, or JEPX, was established to allow wholesale trading.
¶ But despite offering rates that are often a third cheaper than utilities’, the companies, which must depend on utilities’ transmission lines, have captured only 2 percent of the market. Reluctant to lose customers to the new companies, the utilities make it difficult for them to access their transmission networks.
¶ When the Fukushima nuclear plant went offline in March, leaving Tepco unable to supply the Tokyo area with enough power, the new companies believed it spelled opportunity for them. Instead, the government mandated that all commercial customers — including the new companies’ customers — lower their electricity consumption by 15 percent.
¶ That effectively left the new companies with an extra 15 percent supply. But the government offered a solution: sell to Tepco.
¶ “In theory, we were competing,” said Tsutomu Takei, who retired in June as the chief executive of Ennet, the largest new power company. “In a real competitive market, if your rival happens to get hurt, it’s a chance for you to increase your share.”
¶ Ennet was forced to sell its electricity directly to Tepco for a price lower than what it charged its own customers, reportedly leading to monthly losses of about $130,000.
¶ Under another past attempt at deregulation, the other utilities were allowed to compete against Tepco and one another. But they demurred, preferring to keep their monopolies intact. And since the Fukushima disaster, the other utilities have rallied strongly behind Tepco, clearly afraid that its breakup would mean the same for them.
¶ Those with nuclear plants even agreed to contribute $90 million to Tepco’s bailout, one of the clearest indications yet that the web of influence the company wove over the years remains intact.
¶ “It was designed to protect the company and keep it just the way it is,” said Mr. Okumura, the author of “Dismantling Tepco.” The problem, he said, is that the bailout “isn’t just about one company.”
¶ The battle against Tepco has evolved into a contest over the future of Japan itself.
27-11-2011, 10:51 PM (This post was last modified: 27-11-2011, 11:13 PM by RBM.)
Thank you Thriftville,
My two cents ............
I think we are seeing City Mayors and Governors distinguishing and distancing themselves from Central Government. Yes, Japan's National Government and the two main political parties, DPJ and LDP, support Tepco ........ but key Mayors, City Governors and City Vice-Governors do NOT think likewise. One of the things that is becoming crystal clear is that the Tokyo Governor and his Vice Governor are far from beholden to either the DPJ or LDP...... or National Government. They are increasingly flexing their muscles of independence, with the backing and tacit support of city residents fed up with Japan's National Government and National Politicians/Parties.
Governor Ishihara is quite different to the rather mediocre Japanese Politicians we have, in the main, seen in the last two decades. Although he is in his late 70's, Ishihara is a very tough and very driven cookie - if he was a tad younger I'd have put money on him to be a Japan PM. He wants to see Tokyo independant from Japan's National Government - and as the Tokyo electorate no longer views Japan's central government or main political parties as effective or as action-oriented, he is now able to strike out in this pursuit.
As for Inose-san, mentioned in your news-clipping.... he was appointed as Vice Governor by Ishihara-san - Inose had proven to be reformer of Japan under former PM Koizumi (the last PM who was truly popular in Japan). And Ishihara and Inose are making concerted efforts to make Tokyo independent. In my view, their joint intention is to make this plan of a natural gas fired power plant to trigger deregulation in Japan. And being anti-Tepco will only further bolster their support amongst the capital city's electorate. There will be twists and turns to this story but I do not see Tepco winning in any scenario........... their goal is damage limitation.
And there are further winds of change ...... it is worth noting that today Hashimoto-san, a 42 year-old no less, has been elected as Osaka mayor and a chum of his also won as Osaka Governor. Hashimoto aims to merge Osaka Prefecture and Osaka City to make mega city like Tokyo ....... in order to be independent from central government.
Just my humble views. I am still not putting any of my dollars and cents into Tepco. Not brave enough.
Thank you very much for your valuable time to explain the political situation!
The Tokyo governor seems to have some power to go against the central government. Ishihara belongs to LDP, going against the central gov means that there're a lot of internal conflicts within the party?
The electric grid system belongs to Tepco. If Tokyo gov can produce electricity on their own, do they have to go through Tepco's distribution network?
Does Tokyo governor need to get license from central government, in order to operate a utility company?
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