* Draft plan calls for capping TEPCO liabilites at 2-3.8 trln yen-Yomiuri
* Other utilities may be asked to contribute to compensation fund
* Govt would support compensation beyond that of utilities fund
* Tokyo Elec shares jump 12 pct; Kansai, other utilities fall
* Tokyo Elec president, govt spokesman say not aware of the plan (Recasts; adds TEPCO, govt comments)
By Taiga Uranaka
TOKYO, April 13 (Reuters) - Japan may adopt a method used to compensate the victims of the Three Mile Island accident in the United States for claims stemming from the Fukushima nuclear crisis by asking domestic utilities to pay part of the damages, a local newspaper reported.
Tokyo Electric Power and the Japanese government are mulling a plan that would cap the utility's liability to $24-45 billion to save the company from financial ruin in the face of ballooning compensation costs, the Yomiuri newspaper reported.
With Tokyo Electric's crippled Fukushima nuclear plant still spewing radiation, the worry is that claims may quickly swamp its ability to pay.
Tokyo Electric, Asia's largest utility also known as TEPCO, is yet to determine the costs following the March 11 earthquake and tsunami, but Bank of America-Merrill Lynch late last month estimated the company could face compensation claims of more than $130 billion. [ID:nL3E7EV039]
TEPCO President Masataka Shimizu said he did not know about the proposal.
"I know there have been some media reports but I am not aware of that," he said at a news conference in Tokyo.
The report buoyed the wounded power company's shareholders. TEPCO's beaten down shares jumped 12 percent, while Kansai Electric and other utilities that would be expected to help bail it out fell.
The scheme is designed to ease worries in the financial market over the fate of Tokyo Electric, the country's largest corporate bond issuer whose shares are widely held by financial institutions, the newspaper reported.
Government spokesman Yukio Edano said he was not aware of the plan.
"I have not been notified beyond what was reported by the media. I am aware that it was on the media but I have not received any notification on behalf of the cabinet or the government that a specific plan is being formulated," he said.
After a partial meltdown at the Three Mile Island plant in 1979, the industry regulator there limited payouts by demanding other power companies contribute to an industry insurance pool.
Japan's reported proposal would model that, but investors said executing it in the face of public anger about the accident would be far from easy.
On March 11, a magnitude 9 earthquake and a massive tsunami tore through TEPCO's Fukushima facility causing radiation leaks in the world's worst nuclear disaster since the one at Chernobyl 25 years ago.
"It's still very uncertain in terms of how far the government will go in supporting TEPCO. I think the general feeling is that might be a natural disaster, but some part of it is human error. And most people want to see TEPCO punished for the human error," said Yuuki Sakurai, CEO of Fukoku Capital.
"It's too early to tell the fate of TEPCO at this moment, buying or even selling could be very speculative."
TEPCO's Shimizu said he wanted compensation claims to be met early, but didn't give any details about how payments would be made, or who would pick up the bill.
Japan's government so far has said TEPCO should be primarily responsible for compensation, but would ensure it met its obligations.
LIMITED LIABILITY
Yomiuri said under the plan, Tokyo Electric's liability would be capped at 2-3.8 trillion yen ($24-45 billion) and the company would pay 100-200 billion yen annually for 15 years from its profits, the newspaper said.
The plan also calls for other power firms to contribute to a fund that would shoulder up to 2.7 trillion yen of compensation payouts, with the remaining damages to be handled by the government.
The utilities, including Tokyo Electric, would contribute to the fund in proportion to the number of reactors they own. This could come to about 30-50 billion yen for each reactor. Kansai Electric, which has 11 reactors, could be asked to contribute as much 550 billion yen under the scheme, the paper said.
Shares of Kansai Electric, which provides power to Osaka and its neighbouring areas, fell 4.5 percent to 1,772 yen, while Chubu Electric , which serves Nagoya and its surrounding areas, dipped by 3.4 percent to 1,854 yen.
Shares of TEPCO have lost roughly three-quarters of their value since the disaster amid uncertainty over its viability.
"We think extraordinary losses will total 554 billion yen (in the year ended in March), for the costs of scrapping the Fukushima Daiichi plant and bringing thermal power plants back on line and 2 trillion yen in (the current financial year) for the costs of damage compensation to the local community," Tomohiro Jikihara, an analyst at JP Morgan, said in a note. [ID:nL3E7FB3NH].
Before the disaster, TEPCO had $91 billion in debt on its books, of which $60 billion was in bonds and secured notes, according to Thomson Reuters data. Since the catastrophe, TEPCO has also signed a $24 billion emergency bank loan.
The latest proposal follows a string of other ideas floated by government officials, including outright nationalisation of Tokyo Electric and a spin-off of the Fukushima nuclear plant into an entity to handle the accident and compensation. [ID:nL3E7FC1UR]
Whatever form a bailout takes, investors and rating agencies expect the Japanese taxpayer will come to TEPCO's aid.
On April 1, Standard & Poor's cut its long-term rating on TEPCO by three notches to BBB+ from A+. TEPCO's debt remains investment grade, the rating agency said, only because credit analysts are assuming the utility will get help paying compensation. ($1 = 83.625 Japanese Yen) (Additonal reporting by Tim Kelly, David Dolan and Yoko Nishikawa; Editing by Nathan Layne and Vinu Pilakkott)