* Governor says utility hasn't learnt from Fukushima mistakes
* Utility has been struggling to contain contaminated water
* Japan officially raises INES rating for latest water leak
By Aaron Sheldrick and Mari Saito
TOKYO, Aug 28 The operator of Japan's wrecked Fukushima nuclear station, Tokyo Electric Power Co, should be liquidated, as its failure to learn from its mistakes fuels insecurity, says the governor of a prefecture hosting another of the utility's atomic plants.
Tepco was nationalized last year and receives public funds to pay compensation to the 160,000 people who had to flee their homes after a 2011 earthquake and tsunami caused three reactor meltdowns in the worst nuclear disaster since Chernobyl in 1986.
Hirohiko Izumida, governor of Niigata prefecture north of Tokyo, has been arguing for two years that the utility should not be allowed to restart its Kashiwazaki Kariwa station, the world's biggest nuclear plant, unless it gives a fuller account of the Fukushima meltdowns.
Izumida, himself a former energy official, is now upping the ante, saying he believes Tepco's focus on getting the plant's reactors started to save fuel costs of about $1 billion every month overlooks safety concerns.
"There should be some procedures considered to bring about the liquidation of Tepco, because right now short-term funding concerns are taking priority over resolving the problems," Izumida told foreign reporters at a briefing in Tokyo.
The utility's recent admission, following months of denial, that the plant was leaking radioactive substances into the Pacific Ocean showed Tepco had not heeded the lessons of the disaster, Izumida said.
"I feel very insecure about the fact that a company that cannot learn from its past mistakes would operate a nuclear power plant," said Izumida, a former senior official in the Ministry of Economy, Trade and Industry that oversees the energy sector.
Restarting Kashiwazaki was also a central plank of the government's bailout of Tepco, in which 1 trillion yen ($10.29 billion) of capital was injected into the utility last year. Tepco also got a commitment from its banks to lend it another 1 trillion yen, based on getting the reactors operating again.
Tepco's plan to seek regulators' permission to restart was halted when Izumida voiced his opposition in July.
Japan's Nuclear Regulation Authority (NRA) on Wednesday officially raised the severity rating of a new leak of radioactive water at Fukushima to Level 3 on an international scale for such incidents.
The move raises the scale of what was Japan's first warning on the International Nuclear and Radiological Event Scale (INES) since the Fukushima meltdowns in 2011. Those meltdowns were classified as Level 7, the highest INES rating.
Tepco said last week that 300 tonnes of highly radioactive water leaked from a storage tank at the facility, apart from leaks into the ocean confirmed by the utility in July, prompting an initial INES rating of Level 1, the second lowest.
The government has said it will get more involved in resolving the plant's growing problems with contaminated water and seek the advice of foreign experts.
Tepco was not capable of resolving the situation, the governor of Fukushima prefecture said on Wednesday.
"There is no risk management at Tepco and they are no longer capable of dealing with this on its own," Governor Yuhei Sato told the chief of the regulator at a public meeting.
"The government must present specific plans on how to resolve the water problems and put together measures as soon as possible," he told NRA Chairman Shunichi Tanaka.
The NRA chief told reporters Tepco had failed to act on the regulator's warnings to improve monitoring of water tanks at the plant and keep detailed records of inspections.
"I think it has become clear that they are lacking the technical knowledge" to deal with the problems, Tanaka said.
Elsewhere, Taiwan had sent back to Japan by July 15 bulk transport containers contaminated by radiation from the Fukushima nuclear plant, the island's Atomic Energy Council said on Wednesday.
As many as 226 containers from Japan, mostly carrying waste plastics, had shown contamination in excess of the standard level of 0.2 microsieverts per hour, and 211 were decontaminated before entering Taiwan, the Council said. ($1=97.20 Japanese yen) (Additional reporting by Leng Cheng and Cheng Guo)