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Meltdown at Japanese Ultility Tepco Preceded Nuclear Disaster: Former Consultant

As Japanese military struggles to cool overheating fuel rods at the country’s damaged nuclear plant, some suggest a full meltdown might actually be happening somewhere else—in the corporate suites of Tokyo Electric Power Co.

Tepco, as it’s known, is a for-profit utility that owns the Fukushima Daiichi Nuclear Power Station and other plants and provides almost 35% of Japan’s electricity (pdf). And in the wake of the earthquake and tsunami that brought the country to nuclear crisis, the organization is turning into a lighting rod of political criticism. Japan’s Prime Minister Naoto Kan reportedly asked "what the hell is going on" according to the Kyodo news agency when Tepco didn’t inform him for an hour of an explosion at Fukushima 1.

Roger Gale, a nuclear industry consultant and former official at the U.S. Department of Energy who served as a consultant to Tepco for 20 years, says the earthquake, alone, is not to blame for the nuclear to crisis—Tepco was complicit.

Nuclear plants in France, Germany, and the U.S. are far more automated than in Japan, where more controls are based on manual decisions, switches, and reactions, says Gale. He thinks U.S. utilities would have acted more quickly in a similar disaster. "[Tepco] probably reacted more slowly in the initial case than they needed to," he says.

Gale says a culture of complacency within Tepco may also have contributed to the crisis. Tepco has massive cash flows and a reputation for hiring the best and brightest engineers in Japan. However, Gale says, an array of management problems—a lack of transparency, problems with record keeping, relying on manual rather than automatic controls, and being slow on the draw when making decisions—plague the organization.

"They have an intellectual arrogance about them. They have an internal management culture that is not the best," he says. "The top brass [at Tepco] only got their hands dirty when their pens leaked."

Tepco did not respond to repeated messages seeking comment.

Tepco has grown rapidly since 1951, when it started as a utility serving Tokyo after World War II. It reported $62.5 billion in revenue and $1.67 billion in income in fiscal 2009. The recent earthquake, tsunami, and nuclear crisis have so far wiped out nearly $30 billion of Tepco’s market value.

This isn’t the first time the company has weathered financial storms, though. In 2003, profits dove after a scandal in 2002 involving cover-ups of reactor defects that led to the ouster of its President and other top executives. And in July 2007, Chairman Tsunehisa Katsumata and President Masataka Shimizu faced the challenge of lost revenues and criticism from Japan’s prime minister when the Niigataken Chuetsu-oki Earthquake led to a shutdown of its Kashiwazaki-Kariwa Nuclear Power Station for 21 months.

Since the tsunami knocked out back-up generators and caused fuel rod meltdown at the 40-year-old Fukushima Daiichi Nuclear Power Station, Tepco has not appeared in control of the situation, according to Gale and other critics. Executives’ slow answers to basic questions have angered reporters writing about the crisis at the nuclear plant, and have drawn the ire of government officials in Japan and nuclear officials in other countries.

News reports suggest Tepco isn’t transparent regarding its staffing levels and safety conditions at the nuclear site. And some criticize Tepco for using so many human workers for dangerous tasks that could be automated, particularly in a country renowned for its robotics and industrial automation.

Meanwhile, reports are surfacing that there were safety concerns about Japan’s nuclear plant well before the earthquake struck. The Daily Telegraph cited a Wikileaks document that showed international nuclear officials raised concerns in 2008 about the safety of nuclear power plants in Japan, known for its earthquake activity. Bloomberg News reported the U.S. Nuclear Regulatory Commission raised concerns in 1990 that earthquakes could cause diesel generator failure and power outage in reactor cooling systems in Japan, and would be one of the "most likely causes" of nuclear accidents. Which begs the question: Did Tepco heed such warnings?

As a result of the latest nuclear emergency, Gale predicts nuclear power will face headwinds while alternative energy forms such as natural gas, clean coal, wind power, and solar energy will see orders increase. Countries with nuclear plants may also bolster safety measures. Already, European officials are planning full stress tests of the roughly 150 nuclear reactors in the European Union. Wall Street analysts predict rigorous tests on the 104 reactors in the U.S., particularly boiling water reactor designs.

The disaster could even prompt major U.S. corporations to change course. Mr. Gale predicts General Electric Co., which makes the boiling water reactor technology, might decide to get out of the business it helped pioneer. "It’s not good for GE," he said of the Japanese near-meltdown. "It’s deadly for Tokyo Electric." In a statement, GE said it’s safety record is proven over roughly 50 years in the nuclear industry. It says its boiling water reactors "are designed to be able to safely shutdown in the event of an earthquake or other natural disaster."