Power to the people?

After meeting with French President Nicolas Sarkozy today, PM Naoto Kan commented that Japan needs to debate whether Japan’s current electric utility system should exist in its current form. At present, the government grants monopolies to regional utilities, which are private corporations listed on the stock market.

Admittedly, I had not thought much about this issue until this crisis came along, but now I am trying to learn more. Countries take different approaches to who owns the power utilities. For instance, the US has investor-owned utilities that provide around 38% of generating capacity, with the rest a mix of public and cooperative-owned entities.

I don’t have an opinion one way or the other at this point, but I can see how the different ownership structures can skew incentives. If you are trying to provide returns to shareholders, you might be more inclined to promote more electricity usage, as Tepco has done by offering discounts to people who use “all-electric” homes with electricity-powered stoves and baths, etc. On the other hand, both privately owned and public utilities can cultivate the types of entrenched, bureaucratic management teams that lead to the types of massive cover-ups and bungling incompetence we have seen at Tepco.

(Disclosure: I own a small investment in Tepco. Take nothing I say as investment advice)

4 thoughts on “Power to the people?”

  1. TEPCO has a well earned reputation for neglecting safety issues and falsifying data. Several news stories have appeared where seismologists warned TEPCO that a large earthquake and tsunami would create problems at some of its nuclear plants. Its stock has taken a gigantic hit since the Fukushima disaster. The government is thinking of nationalizing the company. If this step is taken, it will be possible to completely change the culture at TEPCO. This is the only way to reorient the company to emphasize safety issues above the profit orientation that dominates their thinking in the past. If the government hesitates or backs down, a magnificent opportunity to prevent future disasters from happening will have been missed.

  2. If this step is taken, it will be possible to completely change the culture at TEPCO.

    Exceedingly optimistic. The Japanese government can barely even change its own bureaucratic culture. What makes you think it can change the power company’s?

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