SONGS Deal Nixes Investment Return

By Published On: March 28, 2014

Southern California Edison reached a settlement March 27 that reduces the utility's rate of return on its San Onofre Nuclear Generating Station investment. The reduction is to be retroactive, dating back to Feb. 1, 2012. The total value of the settlement remains unclear, according to Securities & Exchange Commission documents, but ratepayer advocates declare it could save $1.4 billion of the $5.7 billion in ongoing costs for the shut-down facility. “It’s a very good resolution for ratepayers,” according to Office of Ratepayer Advocates program manager Mark Pocta. “It puts to rest” shareholder and ratepayer unknowns and “it’s fundamentally fair,” said Edison chief executive officer Ted Craver. He added that it clears the path to “pursue insurance, and in arbitration, underway with Mitsubishi Heavy Industries,” Mitsubishi manufactured the allegedly faulty steam generators that caused the 2,100 MW facility to close in January 2012. The California Public Utilities Commission still has to approve the agreement between Edison, Ratepayer Advocates, The Utility Reform Network, and San Diego Gas & Electric. The settlement would make moot the commission proposal to order $94 million in rebates to customers, with potentially more later, related to costs at the reactor in 2012. It was to be considered by regulators on the same day the settlement occurred. The $94 million partial refund took 18 months for the CPUC to litigate, according to commissioner Mike Florio. He estimated it would have taken the commission another two years to litigate the full amount of relief due to ratepayers after the plant shut down. The deal includes, according to parties: • A $597 million reduction in cost for Edison customers; • A $160 million reduction for SDG&E customers; • $480 million to Edison customers in refunds for operations and maintenance; • $121 million to San Diego ratepayers for operations and maintenance refunds; • A $99 million reduction to Edison customers for steam generator replacement costs; • A $5 million reduction to SDG&E ratepayers for steam generator replacement costs; and • Refunding all money collected from both utilities’ ratepayers since Feb. 1, 2012. The agreement also would limit the utilities from collecting returns on investments made after Feb. 1, 2012. For Edison it would prevent collecting on investments totaling $696 million and SDG&E from collecting on investments totaling $221 million. It further would prevent any rates of return on shareholder equity in the plant after Feb. 1, 2012, provide for refunds of any overcharges related to operational costs, and specify that customers of the utilities get a share of any money recovered from Mitsubishi, which manufactured the failed steam generators. It also allows for a reduced rate of return on investment, to 2.62 percent, with no common equity return on the estimated asset worth of San Onofre at $1.9 billion, according to Edison’s Craver. The deal does not affect any proceedings at the Nuclear Regulatory Commission, nor does it affect the ongoing collection of funds in the decommissioning trust. The nuclear plant’s owners (78 percent Edison; 20 percent SDG&E; and 2 percent Riverside) also are pursuing insurance claims for the failed steam generators. SDG&E attempted to extricate itself from San Onofre ownership during the state’s attempt at deregulation, but regulators forced the utility to keep its share of the plant.

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