CPUC Puts Edison at Risk with SONGS Proposed Decision

By Published On: November 4, 2005

Southern California Edison may invest up to $680 million in new steam generators for its San Onofre Nuclear Generating Station, but it will be subject to after-the-fact reasonableness review, according to a California Public Utilities Commission proposed decision. Administrative law judge Jeffrey O’Donnell found the proposed investment to be “marginally cost-effective.” The October 31 decision, if adopted by the commission, would treat the plans for Edison’s investment to prolong the operating life of its nuclear power plant much differently from a similar plan approved for Pacific Gas & Electric’s Diablo Canyon nuclear plant (Circuit, Feb. 25, 2005). In the Diablo case, regulators assured PG&E that a review of the utility’s investment decisions was unlikely, at least as long as the amount spent was less than $706 million. If PG&E exceeds that amount, it is at risk of an after-the-fact review. If the commission finds a utility’s spending “unreasonable” during its review, it can stop it from passing the cost on to ratepayers by imposing a “disallowance.” For instance, of the $5.5 billion originally spent building Diablo Canyon, the commission levied a $60 million disallowance, according to Bob Kinosian, Office of Ratepayer Advocates analyst. Edison plans to replace the steam generators, or heat exchangers, for the nuclear reactor because the current ones are developing unexpected leaks. Only a finite amount of leaks can be plugged before the reactors would have to be shut down to avoid risk of accidents and, thus, radioactive contamination. If the investment were not made, the 2,200 MW facility would be shut down in 2012, according to the CPUC. The 400 MW unit 1 at the site was closed in 1992. Despite the utility?s search for a permanent burial ground for the reactor, unit 1 remains on-site (Circuit, Jan. 23, 2004). O’Donnell said it was too early to determine any undepreciated plant balance if the utility does not proceed with replacing its steam generators and closes the remaining units. Ratepayers are expected to pay back Edison?s initial investment over the life of the facility, but an early closure changes the depreciation formula. However, there is little precedent for requiring the commission to either make the utility eat the remaining undepreciated costs or have ratepayers pay for it despite the plant’s unavailability because of a shutdown. There is no “fixed policy” on how any remaining investment should be recovered, “if at all,” noted the judge. Edison owns the lion’s share of the nuclear facility. Anaheim and San Diego Gas & Electric, which own small shares, refused to participate in the plan for steam generator replacement. The CPUC assumes that will leave Edison with more than 90 percent of the nuclear plant’s ownership. In addition to potentially approving the steam generator investment, the proposed decision also approved the environmental impact report for the procedure. “Nothing in the final EIR precludes” the project, said O’Donnell.

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