Utilities Reach Agreement on San Onofre Closure Costs

Avoiding what could have been a nasty, expensive fight over costs stemming from the early retirement of the San Onofre Nuclear Generating Station (SONGS) last year, plant co-owners Southern California Edison (SCE) and San Diego Gas & Electric (SDG&E) reached a settlement with the state Office of Ratepayer Advocates on March 27 that will potentially save Southern California ratepayers about $1.4 billion. 

SONGS shut down in January 2012 after problems were discovered in replacement steam generators installed in 2009 and 2010. SCE and SDG&E spent hundreds of millions of dollars on repairs, inspections, and replacement power before deciding to retire the plant in June 2013. The settlement calls for the utilities to refund all revenues associated with the replacement steam generators collected since Feb. 1, 2012—the day after a tube in the Unit 3 steam generator ruptured. In addition, the utilities will remove other SONGS-related investments after Feb. 1 from their rate base and recover those expenses at a significantly reduced rate of return over a 10-year period. Costs for the replacement power will remain in the rate base, however.

SCE said it would take a charge before taxes of $730 million as a result of the settlement, while SDG&E will take a charge of $187 million. The deal must still be approved by the California Public Utilities Commission, which began an inquiry into the shutdown in Nov. 2012. That inquiry would be resolved if the settlement is approved.

SCE is still locked in a battle with Mitsubishi Heavy Industries (MHI), which supplied the steam generators, over its warranty claims. The tube damage was traced to a faulty computer model used by MHI, though an investigation by the Nuclear Regulatory Commission last year determined that SCE was aware of potential problems and failed to follow up on the concerns of its engineers who were involved in the design process.

—Thomas W. Overton, JD, Associate Editor (@thomas_overton, @POWERmagazine)