Japan's government endorsed a plan today for a fund to help finance damages stemming from the crisis at the country's Fukushima Dai-ichi nuclear plan using public money and mandatory contributions from utility companies.
Tokyo Electric Power Co expects a deluge of damage claims stemming from the radiation-leaking plant on the northeastern coast, in the worst nuclear accident since Chernobyl in 1986. However, the utility is not expected to be able to pay all of them.
The government's plan, which would spread the burden for the crisis and must be referred to parliament for its expected approval, would create an entity that collects money for the compensation fund from Tepco and other utilities that operate nuclear power plants. The government will issue the body special bonds that can be cashed when needed to pay claims.
Tepco earlier this week agreed to a cost-cutting reorganization as part of the government's compensation plan, which also would set up a commission to monitor the company's management.
Economy and Trade Minister Banri Kaieda insisted earlier this week that the compensation plan was not a bailout for Tepco, but rather a way to ensure victims get paid.
"We want to avoid big changes in the electricity bills and contain (the public burden) as much as possible," Mr Kaieda said today.
Tepco president Masataku Shimizu said he expects the plan to go into effect soon. Under this support scheme, while receiving support from the government, we will prepare to compensate those who are suffering in a fair and prompt manner," he said in a statement.
Shinichi Ichikawa, the director of equity research at Credit Suisse in Tokyo, said the plan needed to achieve three goals: maintain a stable electricity supply, ease concerns of financial markets and ensure victims of the nuclear disaster would be compensated. "It looks like it's a good solution," he said.
Tepco has sought a 2 trillion yen (€17.31 billion) loan to tide it through the initial emergency period. It also expects to pay 50 billion yen (€432 million) in initial compensation to nearly 80,000 residents evacuated from around the radiation-leaking plant, which was hit by a giant tsunami after Japan's massive March 11th earthquake. Overall damages are expected to be much higher.
Also today, the operator of a nuclear plant in central Japan began suspending operations at its reactors while it strengthens tsunami protections, under a separate agreement with the government.
The crisis at Fukushima had prompted the government to evaluate all of Japan's 54 reactors for quake and tsunami vulnerability.
That assessment led to prime minister Naoto Kan to request a temporary shutdown at the Hamaoka plant in Shizuoka prefecture amid concerns an earthquake with a magnitude of 8 or higher could strike central Japan sometime within 30 years. The Hamaoka facility sits above a major fault line and has long been considered Japan's riskiest nuclear power plant.
Nuclear energy provides more than one-third of Japan's electricity, and shutting the Hamaoka plant is likely to exacerbate power shortages expected this summer.
The government has said it will not seek closures of any other reactors in the country.
In a serious setback for efforts to stabilise the Fukushima plant, officials said yesterday that one of the reactors had been more heavily damaged than previously thought. The findings are likely mean it will take longer to execute an April plan to restore the plant's cooling systems to bring the plant's three active reactors to a cold shutdown by early next year.