Tokyo Electric Power: Ethical Meltdown

Jon Entine

June 1, 2011

Tokyo Electric Power has a history of mismanagement and serious safety lapses

In 1998, Kei Sugaoka, a Japanese-American nuclear inspector who was a senior engineer for General Electric and often worked at the Fukushima Daiichi power plant (as GE did contract work there), discovered a cracked steam dryer, a metal component that removes water vapour from steam before it flows into the turbines. He informed his superiors at Tokyo Electric Power (Tepco), operators of the plant, who were obligated to report the incident to regulators. The revelations could have forced the operator to do what utilities least want to: undertake costly repairs.

According to CBS News, Sugaoka "received an order that horrified him: edit out footage showing cracks in plant steam pipes in video being submitted to regulators".What happened next was an example, critics have since said, of the collusive ties that bind Japan’s nuclear power companies, regulators and politicians.

For a while Sugaoka did nothing, but eventually filed a written report to the authorities. Instead of immediately deploying investigators to Daiichi, Japan’s Nuclear and Industrial Safety Agency (Nisa) instructed the company to inspect its own reactors and take whatever action it deemed appropriate. Despite a new law shielding whistle-blowers, Nisa divulged Sugaoka’s identity to Tepco. He was fired and effectively blackballed from the industry he had worked in for more than two decades.

But the news eventually came out after Sugaoka pressed the case with Nisa. By the summer of 2003, Tepco was forced to close all 17 of its nuclear plants temporarily after admitting that it had faked safety reports for more than a decade.

An investigation revealed its executives had actually hidden other, far more serious problems, including cracks in the shrouds that cover reactor cores. It was also revealed that in 1978, control rods at one Fukushima reactor dislodged but the accident was not reported because utilities were not then required to notify the government of such accidents.

Moved, but not removed

One would think that a scandal of this magnitude would have rocked Tepco and forced a major reorganisation of its culture and safety practices. But according to a report in the New York Times, after Tepco’s cover-up became public, its chairman and president, who had been forced to resign, were given advisory posts at the company.

Other executives were demoted, but later took jobs at companies that do business with Tepco. Still others received tiny pay cuts for their role in the cover-up. Following a temporary shutdown and repairs at Daiichi, Tepco resumed operating the plant. Soon afterwards, the company received permissionfrom the Japanese regulators for a 10-year extension in the operating life of the oldest of Daiichi’s reactors.

Then in 2007, the utility said it hadn’t come entirely clean years earlier. It had concealed at least six emergency stoppages at its Fukushima Daiichi power station and a "critical" reaction at one unit that lasted for seven hours. No action was taken against it.

Whether inconsistent or unenforced regulations played a role in these and the most recent incidentis an open question, but this is no way for a country to oversee a technology that has the potential for catastrophic disasters. It raises disturbing questions about whether any government is capable of enforcing regulations on industries that are critical and have enormous political and economic clout.

"Everything is a secret," Sugaoka has said to the Associated Press. "There’s not enough transparency in the industry."

The nuclear industry and government officials in Japan are compatriots in what is popularly referred to as the "nuclear power village". Watchdog Nisa is known as a cushy home for Tepco officials either on the way out or the way in. From 1959 to 2010, four former top-ranking ministry officials successively served as vice-presidents at Tepco.

Profit motive

In the past, engineers who challenged safety claims became village outcasts for threatening the money flow in a lucrative industry, losing out on consulting opportunities and promotions. Until the most recent accident, says Kusuo Oshima (in the New York Times), it was political suicide even to discuss the need to reform the industry. Oshima is one of the few governing Democratic Party lawmakers who have challenged the nuclear industry.

Japan’s two-decade-long economic purgatory has also played a role in perpetuating the status quo. Costly renovations get in the way of building new plants, which create construction projects, jobs and community subsidies.

Consequently, the union-backed Liberal Democrats, which ruled Japan for more than 50 years until 2009, were tight with management and had a backbone of jelly when pushing for reforms. Then, when the Democratic Party came to power 20 months ago, it pledged to reform the nuclear industry and strengthen Nisa, but efforts soon fizzled.

Can things change? Blather about corporate responsibility – including "commitments" to create "a system of individual responsibility and initiative" – on Tepco’s website is not enough.

When the president of Tepco, Masataka Shimizu, resigned in May, he said he and his company took "responsibility for this accident. "There must be change," he declared. He was succeeded by insider Toshio Nishizawa, a senior executive at Tepco, who had previously headed the planning department.

Real change?

Under the government rescue plan, management responsibilities will effectively be taken away from the company and placed in the hands of an independent supervisory body in an effort to make sure that profits are set aside for victims.

To what degree government oversight will ensure that Tepco, and the Japanese nuclear industry, can establish a culture of accountability remains to be seen. At least for now, Tepco’s reputational capital appears to be spent, even though in the end, a nuclear catastrophe following the recent earthquake and tsunami has been averted.

The disaster will be costly to Tepco and its shareholders, and will reverberate throughout the regional economy. Perhaps even more disturbing, in the long run, it might derail international support for nuclear energy, which is a necessary part of the energy demand mix.

But what happened to Tepco’s nemesis? KeiSugaoka took another job at a nuclear facility in Taiwan but abandoned the industry in 2000 and returned to the Bay Area in California, where he grew up. Since 2000, he has worked part-time as a security guard and basketball referee.

Tepco’s responsibility claims

Tokyo Electric Power talks a good game. On the company’s website it makes a number of claims about how it has been acting in a responsible manner, learning from previous mistakes:

"In September 2002, Tepco implemented counter-measures to guard against a re-occurrence of incidents with regard to inspection and maintenance operations at our nuclear power stations. At the same time, the company announced four commitments in the interest of creating a ‘corporate system and climate of individual responsibility and initiative’. The actualisation of the four commitments has been adopted as our social mission, and the entire company is deeply involved in the effort."

Jon Entine is founder of ESG MediaMetrics, and director of the genetic literacy project at the Statistical Assessment Service at George Mason University.