Series: Considering the True Acceleration of Electricity System Reform
Vol.2: The maintenance of the decommissioning accounting system and “measures to spread the burden widely”
―Problems with the discussions in the Finance and Accounting Working Group in Japanese

Calculations related to electric power are particular and complex. Firstly, unlike ordinary companies, the electric utility industry is subject to the “Ordinance on Accounting at Electric Utilities.” Even within this category, nuclear power plants are distinguished from electricity-generating facilities in general, and special accounting systems have been created in several stages from 1969 onwards ⅰ . Specifically, there are systems dealing with the reserve for preparation of the depreciation of nuclear power construction, related to the initial investment in such plants; and with the reserve for reprocessing of spent nuclear fuel, reserve for decommissioning nuclear power units, and disposal costs of designated radioactive wastes, which are related to the costs of decommissioning nuclear power plants. These special accounting systems have become complex as the result of repeated amendments, so that it is very difficult to understand or tell from the accounts how nuclear power operations are going.

The “decommissioning accounting system,” which is currently being debated, was introduced in 2013, making major changes to the prior decommissioning accounting system. If a nuclear power plant is decommissioned, all the assets of the plant simultaneously become losses in accounting terms, and so the impact on the accounts is large. Accordingly, the new system designated them as assets even after decommissioning, allowing continued depreciation.

The important point here is a major principle which must be followed in accounting, namely that “generating profits is a prerequisite for assets.” A decommissioned reactor cannot make electricity and so, by rights, it cannot generate profits. In order to solve this enigma, they created a system under which money comes in even while the plant is being decommissioned, and so it has been deemed to generate profits. By incorporating these “profits” into the costs which form the basis for calculation of the regulated charges, this method of “gaining profits” has been made “steady,” and the major accounting principle has been respected.

And now, citing “liberalization” as the reason, a new “decommissioning accounting system” is being proposed. It is said that “steady recovery” of the costs is no longer possible because of liberalization. Firstly, the system of regulating charges which is a precondition of the current mechanism will disappear. In addition, due to the full liberalization of entry to electricity retail business, it will become impossible to collect the costs from customers who do not choose electricity generated by nuclear power. Given this, in order to maintain the decommissioning accounting system, they say that it is necessary to assign these costs to the wheeling charges (fees for the use of transmission lines), which remain regulated, and create a system which spreads the burden widely.

There are many problems with this argument, but I would like to broadly point out three of them.

The first is that the approach of including electricity generation costs in wheeling charges, to which they are entirely unrelated, is hardly understandable. This is because normally, operational costs are borne by the operator in question, and collected from its earnings.

Financial statements will also become more difficult to understand. Wheeling charges are posted in the financial statements of the transmission company as profits of that company, but since electricity generation costs will be included here, the financial statements of both the transmission and generation companies will lose transparency.

Secondly, as I mentioned earlier, regulated charges (currently, the electricity charges of the major power companies), which can be expected to bring in “steady profits” for the accounts, will disappear as the transition to a competitive system takes place henceforth. Based on this, the logic deployed in the Working Group is that “the nation’s citizens, who previously benefited from cheap electricity generated by nuclear power plants” should shoulder the burden, proposing that it be collected “steadily” through wheeling charges, which remain regulated. However, this is a reasoning imposed after the event, reversing the logical order.

In addition, the main problem is that since revisions to wheeling charges do not require the approval of the Diet, this “mechanism for spreading the burden widely among the nation’s citizens” will be taken forward by the Ministry of the Economy, Trade and Industry (METI) alone from now on. Hitherto, new costs concerning the accounting for nuclear power came up for discussion and new systems were added one after another. And when the systems for the reserve for reprocessing of spent nuclear fuel, reserve for decommissioning nuclear power units, and disposal costs of designated radioactive wastes were created, the costs corresponding to each were allocated to the regulated charges. Such systems are implemented through amendments to the rules created by METI. The “decommissioned reactors are generating profits” system which is currently being debated, and which is incomprehensible to the general public, is one of these. If nothing changes, one impossibility after another will be piled onto the foundations of a distorted system.

It goes without saying that it is important to move ahead steadily with decommissioning, but the question of who should bear which burdens, and in which ways, is one which should surely be debated by the nation as a whole (the Diet). “The burden-sharing by beneficiaries” is also being argued as one of the grounds of spreading this burden widely. However, this argument should be sufficiently debated, including the issue of who really has benefited under the current system, and if the nation’s citizens should share the burden widely, this should be properly determined through legislation.

Thirdly, the Working Group is trying to discuss only the framework for the system; it is not seen how far the burden would swell if this system were to be launched, which is another major problem. As a matter of fact, several of the Working Group members have requested concrete information about this.

The costs surrounding nuclear power are colossal. Besides the issue of assets falling under the remit of decommissioning accounting, there are many different expense items, including the decommissioning costs of nuclear power units, reprocessing costs of spent nuclear fuel, managing costs of radioactive wastes, dealing with any accidents that may occur and paying compensation for damages, etc. Some of these costs are within the scope of discussions of this Working Group, but the entire picture, including the sums of money concerned, is not seen.
Precisely since these are businesses bound by complicated accounting systems, surely they have an even greater responsibility to fulfil their duties of corporate accountability and to clarify the status of their operations.

 ⅰ This process and the problems involved are covered in detail by Eri Kanamori in “Accounting for Nuclear Power in Japan” (CHUOKEIZAI-SHA Inc., 2016)