An arbitration panel of the International Chamber of Commerce (ICC) has awarded Southern California Edison (SCE) $125 million in its dispute with Mitsubishi Heavy Industries (MHI) over the failed replacement of four steam generators at the San Onofre Nuclear Generating Station (SONGS), a fiasco that ultimately led to the plant’s premature retirement.
Victory for MHI
The amount was a victory for MHI, as SCE was seeking a total of $7.6 billion for the loss of the plant. MHI was also awarded $58 million in attorneys’ fees because of its additional costs incurred in defending the larger claim. SCE must split the remaining $63 million with its co-owners San Diego Gas & Electric (SDG&E) and the City of Riverside. The utilities were seeking the additional funds to help cover retirement costs for SONGS, which are estimated at almost $5 billion. Those costs will now be borne mostly by ratepayers.
SCE’s claim was brought under its contract with MHI, which had a liability limit of $137 million. In the 2-1 decision, the ICC panel declined to depart from that limit, though the dissenting panel member felt SCE should have been awarded more.
“We had hoped the award would more accurately reflect the true magnitude of damage caused by Mitsubishi’s defective steam generators,” SCE President Ron Nichols said in a statement. “Unfortunately, the arbitration panel concluded that the contract’s prescribed liability limit should be respected and no additional award can be granted despite the harm caused.”
Steam Generator Leaks Force SONGS Retirement
MHI manufactured the replacement steam generators for SCE, which installed them at SONGS in 2009 and 2010 (Figure). The saga began in early 2012 when Unit 3 experienced a tube rupture in its new steam generator. Unit 2 was offline for a planned outage at the time, and subsequent inspections uncovered accelerated tube wear in both units. Following an extensive investigation, the Nuclear Regulatory Commission (NRC) concluded that the problems stemmed from a flawed computer model that was used to design the replacements. After the NRC expressed doubts about a quick restart, SCE decided to retire the plant rather than commit to repairs. SCE then sought compensation from MHI under the steam generator warranty.
SCE and SDG&E had previously been awarded $400 million from their insurer for the incident. The premature retirement of the 2,250-MW plant upended reliability planning across Southern California, stressing both its electrical and natural-gas transmission capacity, briefly bringing one mothballed plant out of retirement, and leading to accelerated development of new gas-fired and renewable generation.
The ICC decision does not end the dispute over SONGS, as multiple other actions are pending over the retirement, including a class-action suit brought against the utilities by ratepayers.
—Thomas W. Overton, JD is a POWER associate editor (@thomas_overton, @POWERmagazine).