Consumers can expect to see higher electric bills as Tokyo Electric Power Co. passes on its compensation obligations due to the Fukushima No. 1 nuclear power plant accident.
Government sources said May 2 that an estimate of the total amount of compensation required reached 4 trillion yen ($48.7 billion) and that TEPCO would be expected to cover about half of that.
TEPCO and the eight other electric power companies will pay the compensation over a 10-year period, and each company is expected to raise electricity rates. For TEPCO, that would likely mean a close to 20-percent increase in rates.
Because the accident at the Fukushima plant is far from resolved and the exact amount needed for compensation and to decommission the crippled nuclear reactors have not been set, the estimates are preliminary figures that would serve as the outer limits and still allow TEPCO to continue as an independent company.
While consumers and taxpayers will be forced to share the TEPCO burden, the major financial institutions that have made emergency loans to the electric power company would not be expected to pay more. That will likely lead to questions about the fairness of the compensation plan.
Cabinet ministers handling the issue are continuing with discussions, but under the estimates that have been calculated, TEPCO would handle the compensation.
Whatever funds it cannot procure will have to be provided by a new organization to be established by the electric power companies. The central government will also contribute funds to that new organization. The electric power companies will be asked to repay the public funds by returning 400 billion yen a year over a 10-year period.
Of that 400 billion yen, TEPCO would be required to make a special contribution of 100 billion yen a year. The remaining 300 billion yen would be shouldered by the nine electric power companies, including TEPCO, that operate nuclear power plants.
Each company’s share would be determined by its electric supply. Because TEPCO provides about one-third of all electricity in Japan, its share would be about 100 billion yen.
According to sources, TEPCO will likely have to raise electricity rates by about 16 percent to secure the funds to place in the compensation pool.
The eight other electric power companies would together have to contribute about 200 billion yen. That would mean about a 2-percent increase in electricity rates for those companies.
TEPCO would end up contributing about 2 trillion yen of the overall expected compensation amount, with the eight other electric power companies contributing the remaining 2 trillion yen.
The new organization would receive the equivalent of 1.6 trillion yen in preferred shares in TEPCO as a means of preventing a loss of trust in TEPCO and a downgrading of its debt ratings.
The government estimate also foresees a total cost of 1.5 trillion yen to decommission the six reactors at the Fukushima No. 1 plant as well as an additional 1 trillion yen a year to pay for fuel to be used at thermal power plants.
TEPCO will also be expected to implement downsizing measures totaling 150 billion yen by the next fiscal year as well as selling off a total of 300 billion yen in real estate and stock holdings.
The government expects an annual payment of 1 trillion yen in compensation, with payments to end after four years.
While Chief Cabinet Secretary Yukio Edano rejected the notion of setting an upper limit to the compensation amount to be paid by TEPCO, an estimate for compensation amounts was made to allow TEPCO to compile its financial statements for the fiscal year that ended in March.
Government sources have not given any indication of what would happen if total compensation exceeded 4 trillion yen.
TEPCO is expected to post a net loss of about 800 billion yen for the fiscal year that ended in March. However, the company is seeking to climb out of the red in four years. TEPCO officials want to resume issuing corporate bonds after fiscal 2014 as well as seek to resume dividend payments to shareholders by fiscal 2018.
Takeshi Kamiya and Kazuo Nakano