State OKs $4.8B nuke-plant settlement
Southern California utility customers will pay $3.3 billion in costs associated with the early shutdown of the San Onofre Nuclear Generating Station, under a settlement approved Thursday by the California Public Utilities Commission.
The deal resolves who pays — consumers or stockholders — for the early demise of twin nuclear reactors that had provided one-fifth of San Diego’s electricity.
San Onofre was retired in 2013 because of the rapid degradation of its newly installed steam generators.
The owners of the plant, Southern California Edison and San Diego Gas & Electric, had sought to recover an additional $1.45 billion in costs. But the commission, in a 5-0 decision, said the utilities must pay most of the tab for the botched generator replacement project, and lowered the rate of return on underlying plant investments.
That translates for Edison into a $806 million charge against earnings before taxes ($461 million after taxes). SDG&E, which owns one-fifth of the plant, booked its own $187 million charge ($128 million after taxes), in anticipation of the settlement.
All told, consumers will pay $3.3 billion toward the plant between the date the plant stopped producing power on Jan. 31, 2012 and the end of 2022.
It is not clear how much the utilities have already collected. Edison said it expects to provide a rate reduction in January as a result of the settlement, with rates rising again later in the year.
In brief comments, utility commissioners characterized the deal as a fair way to avoid a drawn-out fight.
“The agreement provides substantial relief to ratepayers upon adoption by the commission and eliminates the need for a year or more of intense litigation with uncertain outcomes,” the commission wrote in the decision.
Several consumer groups objected to making a deal without first delving into Edison’s responsibility in the steam generator failures.
“Until you have the examination of that issue, you cannot fairly adjust the burden of the long-term costs of San Onofre,” said attorney Michael Aguirre, who filed a federal lawsuit earlier this month against the commission and Edison seeking $3 billion in restitution to utility customers.
Edison has been cited by the Nuclear Regulatory Commission for failing to properly check the design of the generators. Mitsubishi Heavy Industries, the manufacturer, was cited for flawed computer codes used in the design phase. Inside the generators, steam flows produced violent vibrations and rapid wear among tubes carrying radioactive water — eventually triggering a small radiation leak that shut the plant down.
The utilities originally intended to collect $768.5 million for the generator project, but will keep only about 20 percent under orders to refund funds collected after the plant shutdown. Those refunds would be credited against overruns in electricity commodity costs.
Edison and SDG&E stockholders will recover underlying investments in the plant at a reduced return rate of less than 3 percent — a $419 million reduction over the course of 10 years.
“I believe this does represent a good balance between ratepayer and shareholder burdens,” said Catherine Sandoval, one of the commissioners. Another, Carla Peterman, called the agreement a “reasonable outcome” that allows regulators to move on from protracted disputes. In a statement, Edison called the settlement “fair and reasonable.”
The settlement was negotiated in private between the utilities and two consumer groups, the state’s Office of Ratepayer Advocates and The Utility Reform Network in San Francisco. It was later endorsed by groups including the Coalition of California Utility Employees and Friends of the Earth, an environmental group that challenged efforts to restart San Onofre on safety grounds.
Several consumer groups opposed the settlement: the Alliance for Nuclear Responsibility, Women’s Energy Matters, Coalition to Decomission San Onofre and Ruth Hendrix, a San Diego resident and proxy for SDG&E customers represented by Aguirre.
They criticized numerous provisions — especially the commission’s decision to settle without looking into whether Edison shares culpability with Mitsubishi.
Edison installed the generators under a frequently used rule that allows plant operators to replace equipment without prior approval, provided they can show the switch does not cause significant changes to plant operations or safety.
A subsequent review, after the plant broke down, turned up questions about whether Edison downplayed the significance of changes to the original generator design to sidestep a lengthier regulatory review.
In addition, federal nuclear safety regulators missed red flags in 2009 when they agreed to pre-approve the steam generators, according to an investigation by the NRCs Office of Inspector General. When that investigation was published, Sen. Barbara Boxer, D-Calif., vowed to hold hearings in December before the Senate Environment and Public Works Committee, which has oversight authority for the NRC.
Edison has been pursuing claims for damages against Mitsubishi in excess of a $139 million warranty on the four massive generators.
Whatever Edison wins through binding arbitration will first go toward legal expenses, with the remainder split 50-50 between utility customers and corporate stockholders, under the settlement agreement.
Mitsubishi says it could not have foreseen its computer-code errors, and has emphasized that it offered to repair the generators before Edison decided in June 2013 to close the plant. Edison also is pursing insurance claims through an industry cooperative.
It was unclear whether opponents of the settlement would pursue an appeal with a state Court of Appeals, which hear most challenges to commission decisions. The Coalition to Decomission San Onofre is a co-plaintiff to the federal suit.
