Showing posts with label nuclear disaster. Show all posts
Showing posts with label nuclear disaster. Show all posts

Saturday, May 14, 2011

Kruel Kan Going after TEPCO Pensioners? So Surprise Me

I’ve been getting a few inquiries on the government’s (so far) successful decision to essentially force TEPCO’s private-sector stakeholders—employees, shareholders, creditors, sister regional (de facto) monopolies, and yes, consumers—to foot the entire bill while remaining for the time being for practical purposes the guarantor of TEPCO’s solvency and viability. The following is my written response, unedited, to an email that refers to a Nikkei report that Prime Minister Kan is asking TEPCO pensioners to join the rest of the stakeholders lining up for haircuts. I relied solely on my memory to write it and I’m not a lawyer, so some of the facts being used may be a little off, but I’m pretty confident that the overall narrative is pretty sound. I’ll also add here, as I told one of the inquirers on the phone, that the SOB that (I think) he is, he puts policy ahead of politics, not the other way around as more conservative parts of the Japanese mainstream media suggests.

I’ll meet you half way. I agree that Kan is an SOB. Anecdotes in the media and on the grapevine suggest that he’s been that way all along. But “political” SOB? I’m not so sure, at least in this case. True, TEPCO pensioners are not legally responsible for the mess barring the individual TEPCO pensioner whose individual contributory negligence is proven. However, if the government does not step in beyond the 120 billion yen and keep TEPCO solvent, creditors (or TEPCO) would have no recourse but to enter into one of the bankruptcy procedures and take significant haircuts. The no-doubt very generous discretionary portion (上乗せ部分) of the corporate pension plan will be in jeopardy, as TEPCO payments into the pension fund will be slashed, affecting TEPCO pensioners present and future. So, if it’s not unreasonable to demand that if the government is going to step in to save TEPCO, all stakeholders—and that includes the sister regional monopolies if you think about it—must chip in with a portion of their potential losses in the event of bankruptcy, then it’s not unreasonable to demand that TEPCO pensioners pitch in too. If this story sounds familiar, it is. It’s the parable of the JAL pensioners.

So much for Kan’s jerkhood. Or is it? Are we carrying strict liability too far? After all, one of the concessions that the government made to convince Chubu Electric Power to stop its one currently operating nuclear unit was to agree that CEP had done nothing wrong and was shutting the unit down purely as a matter of government policy. Now TEPCO stakeholders must be wondering: What does CEP have that TEPCO doesn’t? One journalist reminded me, “The accident.” True. And the Nuclear Power Indemnification Act (NPIA) demands strict liability. But Chief Cabinet Secretary Edano has on at least one occasion stated that TEPCO and the government are jointly and separately liable (不真性連帯責任), and a couple days after that the responsibility was a 50-50 split. Legally, that means that TEPCO can sue the government to shoulder its prorated-for-responsibility part of the damages. Moreover, there’s a plausible case to be made—I won’t bother with my reasoning here—that Article 3, paragraph 1, of NPIA should be invoked, putting the entire damages squarely on the government’s shoulders and the government’s alone.

The government has been doing a pretty good job of bluffing TEPCO into submission, and the TEPCO board of directors would have to move to the Caymans or someplace else where right-wing megaphone vans and firebombs cannot reach their dwellings before they could make a stand. Still, there’s no reason to believe that overseas shareholders and creditors—say, some hedge fund in Connecticut that happened to have been holding a chunk of TEPCO shares before the tsunami inundated Fukushima 1 might have reason to bring a shareholders suit on behalf of TEPCO against the government—it would be an administrative lawsuit in the case of Article 3, paragraph 1 and a civil lawsuit in the case of recovery of prorated damages—or TEPCO board members for damages.

In fact, the alternative that I present here would be a very real one if this occurred in a different socio-political environment. (Say, Delaware?) So, barring the odd US hedge fund—and there’s probably a legal minimum proportional holding required to bring shareholder lawsuits; you can look it up—the saga is likely to unfold more or less according to the government’s storyline,although there will be political bumps along the road. But no one seems to have a better alternative, and no one appears willing to contemplate an formal bankruptcy whose ramifications for the immediate stakeholders and more broadly the Japanese economy itself are unknown. In the meantime, though, it is only fair in my view that TEPCO pensioners, like any other group of stakeholders, shoulder its proportional share of the full financial burden.

BTW it is useful to keep in mind that TEPCO is likely to be allowed to more or less pass on the 1 trillion yen/yr in extra fuel costs and the write-down for at least four nuclear power units, and all the regional monopolies should also be allowed to include their payments into the newly proposed sinking fund in calculating their tariffs. So we the electricity consumers will also be sharing the costs of the disaster.

Thursday, May 05, 2011

My Take on the Asahi/Wikileaks, Mostly Focused on the Nuclear Disaster

Another stateside friend New York tossed this NYT report my way. The following is my response, lightly edited here with a sentence tacked on at the end.

The bits and pieces mostly jibe with what we've been seeing and hearing in the media since the DPJ took over. That's what's remarkable about the US wikileaks in general. It's like, tell me something we hadn't known or suspected. That said:
..."Compartmentalization and risk aversion within the bureaucracy, however, could increase Japan's vulnerability to threats for which it is less prepared,"

Bureaucratic decision making has been cited as a factor in Japan's lack of preparedness, almost exactly three years later, for the record-breaking tsunami that crippled the Fukushima Daiichi Nuclear Power Station and set off the worst nuclear disaster since Chernobyl. While the cable offers few specifics about the weaknesses in Japan's disaster planning, it does go on to warn that a blow that disables the country could have catastrophic consequences for global trade and finance.
Note that the first sentence appears to refer to the response to a threat for which it has not prepared for, while the subsequent paragraph appears to be referring to the lack of preparedness itself. These are two connected but logically distinct propositions. Confuse the two, and you get a narrative that is literally nonsense. A bureaucracy, of course, is by nature compartmentalized and risk-averse, so, left to its own resources, will always respond poorly to the unforeseen. Case in point: Hurricane Katrina. That is why leadership is so important. Case in point: Hurricane Katrina. And leadership is where the Japanese public is pinning the blame on. In my conversations on this subject, I've insisted that the typical response under the LDP regime to a nuclear disaster--any disaster--would have been to put the administrative deputy chief cabinet secretary in charge of crack bureaucrats assembled from the responsible ministries, team him up with a parliamentary DCCS, and have chief cabinet secretary preside over the entire process. The CCS could share the chores of public communications with the prime minister. Basically, put the people who know how the parts work, to minimize on-the-job learning. Instead, Kan approached the task as if a car broke down in the middle of the road, tried to repair it himself, then ignored the manual and started asking passers-by for advice.

That said, I suspect that most of the things that came to pass were driven by science and engineering and that most of the mistakes came in the public communications process. Note, though, that the human response to any nuclear disaster tends to be deeply irrational, unscientific, and apocalyptic. This means that the margin of error for managing the figurative—if not the physical—fallout is very small compared to other disasters, such as massive toxic chemical spills—or the tsunami itself.

More on My Take on TEPCO’s Post-Nuclear Disaster Liability

A friend of mine wrote in to tell me that according to a media report, plans are afoot for a 50/50 split between TEPCO and the government for liability stemming from the nuclear disaster under Article 16 of the Act on Compensation for Nuclear Damage. However, he’s looked at the TEPCO website and thinks that it’s still looking to be absolved altogether somewhere down the line under Article 3, paragraph 1 of the Act. The following is my response, lightly edited. I left a couple of embarrassing details visibly edits because I thought it was funny that I’d totally forgotten that I’d blogged it. At least I didn’t imagine it all in the still of the night.

It’s about time.

I made the argument early on—the SSJ Forum, where predictably no one picked up on it—that TEPCO directors could face shareholder lawsuits if they did not pursue the Article 3.1 route. And if I were a hedge fund holding TEPCO shares, I would be afraid of being sued by my investors if I didn't file that lawsuit against the TEPCO directors. Now, if I were a shareholder of that little old bank in Illinois that had put some of its money in that hedge fund... Remember how those little old banks would hold the entire deal in ransom during the 90s bailout negotiations?

As for the 50/50 split, it's been at least a couple of weeks since Chief Cabinet Secretary Edano said that the government and TEPCO were jointly and severally liable (I think that's essentially what he meant by 真正連帯債務) and maybe a week[couple of days] (ed. HAHA I’d forgotten that I’d blogged it two nights ago) since he mentioned, almost in passing, that it would be a 50/50 split. I was surprised on both occasions when the media failed to take note. It's probably hard for people who don't go to the source to realize that the power utility that everyone loves to vilify is facing strict liability. It would be difficult IMHO to prove negligence, since TEPCO had jumped all the legal hoops up to the Fukushima disaster. Government negligence should be easier to prove, since it was the one who decided not to require more precautions despite some expert opinion to the contrary. With power comes responsibility. But 50/50? I wonder where that came from. Surprising to hear a lawyer—Edano—make that concession before the inevitable negotiations with TEPCO. I wonder if the fix is already in.

All in all, I'd go for Article 3, paragraph 1; it heals you, whereas Article 16 only keeps you alive, and who wants to be on life support for the next 20 years…Oh, Dr. Kerkevorian...