PUC Wants San Onofre Deal Reworked So Customers Don’t Eat 70% of the Cost

Wednesday, September 10, 2014

A preliminary deal over who will pay for the shutdown of the San Onofre nuclear plant—utility shareholders or customers—had a whiff of finality about it in when negotiators reached accord in March.

That is not to say it was a popular decision to stick ratepayers with $3.3 billion of the $4.7 billion cost of unnecessarily losing a primary source of electricity for the state. But the utilities had relented and not asked customers to pay the whole bill, and critics were divided. 

But last week, a member of the California Public Utilities Commission (PUC) and two administrative law judges reviewing the agreement for the panel, expressed unhappiness with the deal and said they wanted modifications. Commissioner Michael Florio and Judges Melanie Darling and Kevin Dudney wrote in their order that the agreement in its totality may be OK, but “a few terms which unfairly disfavor ratepayers” outweigh that.

They thought that Southern California Edison and San Diego Gas & Electric would unfairly get most of any money recovered from Mitsubishi, the manufacturer of equipment that failed, leaked radiation into the air and effectively ended the plant’s life. They want any money gleaned through litigation or otherwise to be split evenly with ratepayers.

The regulators want a fairer division of any insurance money that is collected down the road and a review of potential savings from refinancing San Onofre assets. Their recommendation goes to the five-member PUC.

The Alliance for Nuclear Responsibility (A4NR) was singled out in its criticism of the proposed settlement for not taking into account “one of the largest negative consequences arising from the San Onofre shutdown: increased electricity prices and carbon dioxide emissions.” The alliance cited a University of California report that blamed the plant closure for increasing the reliance on natural gas, which dumps an extra 9 million tons of carbon dioxide into the atmosphere in a 12-month period.

The regulators proposed that such a huge consequence be offset by the utilities contributing just $5 million a year to create a program that studies innovative ways to reduce greenhouse gases.

The utilities spent hundreds of millions of dollars to replace generators and tubes and perform other extensive work at San Onofre in 2010 and 2011. The plant temporarily shut down in January 2012 when investigation of a radioactive steam leak turned up thousands of damaged and prematurely worn pipes.

The Mitsubishi-built generators were found to have an engineering problem that caused excessive vibration and the nuclear plant was shut down permanently in June 2013, despite efforts by the plant operator to keep it going.

The proposed settlement was negotiated by: Coalition of California Utility Employees, Friends of the Earth, Office of Ratepayer Advocates, San Diego Gas & Electric (SDG&E), Southern California Edison (SCE) and The Utility Reform Network (TURN).

TURN, a nonprofit consumer advocacy group, characterized the regulators’ recommendations as modest and a confirmation of the basic structure of the deal.

–Ken Broder


To Learn More:

PUC Calls for Revisions in San Onofre Shutdown Cost Settlement (by Marc Lifsher, Los Angeles Times)

Victory! San Onofre Settlement Deemed Unfair (by Don Bauder, San Diego Reader)

San Onofre Deal Is Either a $1.4 Billion Win or a $3.3 Billion Loss for Customers (by Ken Broder, AllGov California)

Who Should Pay for Defective San Onofre Generators? (The Utility Reform Network)

CPUC Identifies Changes Needed to Proposed San Onofre Settlement Before Further Consideration Can Be Given (California Public Utilities Commission) (pdf)

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