San Onofre’s Inevitable Shutdown

By Kennedy Maize

Washington, D.C., June 7, 2013 – It comes as no surprise that Southern California Edison this morning announced it would permanently shut both of its San Onofre Nuclear Generating Station nuclear reactors, a total of 2,350 MW of base load generating capacity. The signs of inevitable shutdown have been evident at least since Edison unveiled its 70% solution, which never passed the straight-face test.

The decision will show up as a red-ink write off on second quarter earnings of $450 million to $650 million pre-tax. It will also show up in an extended shoot-out with Mitsubishi Heavy Industries, which supplied the failed steam generators that brought to plant to its knees in January 2012. Litigation with insurers is also a likely outcome. While shareholders and customers will pay a price for the closures, it could turn into a windfall for trial lawyers.

In its press release today announcing the decision, Edison cited its plan last October to operate Unit 2 at 70% power (so as to not further challenge the mysteriously flawed and fragile steam generator tubes) for the summer, then shut it down again and take a look into the guts of the steam generators. The utility said it wanted the Nuclear Regulatory Commission to act by June.

It was a ploy to help supply the region during its summer peak, and, probably more important, stem the bleeding on the expenditures for purchased power and generate some revenue for the company. But it generated a lot of skepticism inside the NRC, where the mission is safety, not the economic interests of the licensees.

Then the Atomic Safety and Licensing Board hammered the plan last month, strongly suggesting that the utility needed to go through a full-scale licensing procedure before it could implement its novel restart plan. In its press release, Edison cited the ASLB ruling, saying it “creates further uncertainty regarding when a final decision might be made on restarting Unit 2.”

The most significant part of the press release, in my view, comes in these sentences: “Additional administrative processes and appeals could result in delay of more than a year. During this period, the costs of maintaining SONGS in a state of readiness to restart and the costs to replace the power SONGS previously provided would continue. Moreover, it is uneconomic for SCE and its customers to bear the long-term repair costs for returning SONGS to full power operation without restart of Unit 2.”

And a glimpse into what could be a nasty, long, and brutish future comes in this sentence: “SCE intends to pursue recovery of damages from Mitsubishi Heavy Industries, the supplier of the replacement steam generators, as well as recovery of amounts under applicable insurance policies.” Looks like a steel-cage death match is on the horizon.