20 april 2011

System bred Tepco’s cosy links to watchdogs

By Jonathan Soble and Michiyo Nakamoto in Tokyo, Financial Times, April 19 2011

When an American whistleblower told Japanese nuclear regulators in 2000 that Tokyo Electric Power had been hiding safety violations at its atomic plants, the regulator assigned the task of investigating to the entity that knew the plants best: Tepco itself.

Two years later, the utility duly reported that its nuclear facilities were safe – only to backtrack within weeks as evidence emerged that it had falsified inspection data. Senior executives resigned over the scandal, and Tepco was forced to shut down all 17 of its nuclear reactors for a comprehensive safety review.

The decade-old incident has been recounted often since Tepco’s Fukushima Daiichi nuclear facility began leaking radiation after Japan’s tsunami on March 11.

The focus has mostly been on Tepco: the company has been harshly criticised over the Fukushima accident, and many say the earlier scandal illustrates a long-held contempt for safety standards.

Yet for Japanese critics of nuclear power, it is the role of regulators in the 2000-2002 episode that is most galling.

The Nuclear and Industrial Safety Agency (Nisa), an arm of the industry ministry whose job is to oversee safety at Japan’s 54 nuclear reactors, revealed to Tepco the identity of the whistleblower – a contractor at General Electric – and did little, the critics say, to ensure his claims were taken seriously.

“The government has been saying atomic power is OK because we have Nisa and the Nuclear Safety Commission [another oversight body], but that’s a lie,” says Kunihiko Takeda, a uranium enrichment expert who worked in the nuclear industry for two decades before becoming a professor at Chubu University. “Tepco is bad, but it’s the system that allowed it to get that way.”

Critics want Nisa – the more powerful of the country’s two nuclear regulators – to be made fully independent. Currently, the regulator is staffed by bureaucrats from the industry ministry who are involved in the day-to-day supervision of the atomic plants.

The other regulator, the NSC, is an advisory body of outside experts who are supposed to review project applications and set overall safety guidelines. It is widely seen as toothless and has been largely invisible during the Fukushima crisis.

Atsushi Kasai, a former laboratory chief at the Japan Atomic Energy Agency, a government-affiliated research centre, compares the NSC to the unobtrusive stagehands in a kabuki play. “They’re supposed to be responsible for Japan’s nuclear safety. Why aren’t they out in front?”

On Monday, Japan took a step toward improving supervision of nuclear power by prohibiting senior civil servants involved in regulating the industry from taking jobs at electric utilities after they retire – a long-accepted practice known as amakudari, or “descent from heaven”.

According to data compiled by Tetsuya Shiokawa of Japan’s Communist party, which opposes nuclear energy, the country’s 10 electric utilities have hired 45 retired industry ministry bureaucrats to director-level positions over the years, including six now in top executive roles.

At Tepco, four former bureaucrats have become deputy presidents. A fifth, Tetsu Ishida, who joined the utility in January as an adviser after heading the industry ministry’s Agency for Natural Resources and Energy, was expected to follow the same path, but announced on Tuesday he would leave the company.
A nuclear protester beats a drum in front of a Tepco showroom in Tokyo

A senior executive at another electric utility says the relationship between Tepco’s nuclear specialists and their erstwhile overseers is defined at the very start of their careers.

“The top graduates of Tokyo University’s nuclear physics department go to Tepco, and those who were less academically successful go to Nisa,” he says.

Bureaucrats have had a largely free hand in setting nuclear power budgets – more than Y400bn ($4.9bn) of public money is spent annually on areas such as basic research, waste handling and subsidies for communities that host nuclear facilities – and have quietly helped utilities avoid deregulation, the executive says.

Civil servants and utilities sealed their pro-nuclear alliance during the 1970s oil shocks, and in many ways the link is a throwback to Japan’s industrial-policy heyday. Even the more left-leaning Democratic party coming to power two years ago has done little to change the status quo.

“Nuclear policy is something politicians can’t touch,” says Eisuke Sato, a former governor of Fukushima and industry critic, who cites technical complexities involved for politicians’ reluctance to question specialists.

The industry’s clout with regulators does not seem to have made its bosses rich. Tepco’s 21 directors made an average of Y34.3m each in the year to March 2010 – hardly vast sums for running a company with more than Y5,000bn in annual sales.

Rather, Mr Sato and others say bureaucrats and nuclear industry officials see themselves as united in the “cause” of defending nuclear power from its critics.

Banning amakudari is likely to be only the first small step in changing the system after the worst nuclear accident in a quarter of a century.

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