PG&E?s $706 Million Nuke Investment Faces Opposition; Edison Floats Similar Plans

In a bold move, Pacific Gas & Electric asked the California Public Utilities Commission to preapprove payments of $706 million to replace steam generators at its Diablo Canyon nuclear facility before regulators decide whether replacing the generators is in ratepayers? interests. On the same day that hearings on Diablo?s proposed investment got under way at the commission, February 27, Southern California Edison applied to the commission for payments ?as they are incurred? for some of the costs to replace nuclear generators it co-owns at the San Onofre Nuclear Generating Station (SONGS). PG&E asserted that without commission preauthorization of the $706 million by this June, costs would escalate for future ratepayers. However, the opposite?not investing the money in extending Diablo?s life beyond the current Nuclear Regulatory Commission license?was not addressed by the utility. Current licenses for Diablo expire in 2012 and 2013. According to PG&E, delaying replacement could increase the risk of early shutdown and prolonged outages because of stepped-up inspections and maintenance. Installing new units by 2009 will save ratepayers more than $1.77 billion, maintains PG&E, compared with the costs of replacing the capacity and energy output of Diablo and of additional new gas-fired plants. Calculations were based on computer modeling, including modeling of the cost of replacement energy. At last week?s meeting, administrative law judge Jeffrey O?Donnell made it clear that the CPUC would not rubber-stamp PG&E?s request. PG&E?s motion seems to ?prejudge the outcome? of the case before the evidence is in, said O?Donnell, calling that stance the ?single biggest flaw? in the utility?s application. In a series of pointed exchanges, O?Donnell told PG&E to pin down replacement costs for the steam generators without what the utility has called ?contingencies.? PG&E was pressed to disclose more data on how the utility formulated its models measuring ratepayer benefits of Diablo. Further, if environmental impact studies are warranted, the judge questioned whether a draft decision could be issued before these studies are completed. ?This is a nuclear facility. It probably would be prudent to do a CEQA [California Environmental Quality Act] review,? said Pam Nataloni, a CPUC legal division staffer. As the commission wrestles with issues that will determine whether nuclear facilities get a second lease on life or are slated for shutdown, consumer advocates have added a twist by charging that numerous companies have pursued litigation against the manufacturer of Diablo?s steam turbines?Westinghouse. Edison, for instance, filed a legal challenge against Westinghouse in the 1980s over steam generator problems at SONGS unit 1, which has since shut down. As part of its protest against PG&E?s bid to replace the generators, The Utility Reform Network has reported that in 1978, more than a dozen companies filed lawsuits against Westinghouse, complaining about corroded and cracked steam generator tubing from the company. Both TURN and the Office of Ratepayer Advocates want PG&E to press Westinghouse for cost recovery before increasing ratepayers? responsibility for new steam generators. PG&E responded that the steam generators have operated successfully since 1984. Also noted was the Westinghouse warranty for the original steam generators, which specified that the manufacturer would replace defective parts within one year of the contract?s acceptance. That contract, which dates back to 1968, stated that Westinghouse would not be responsible for any consequential damages, including the cost of purchased or replacement power. PG&E continues its relationship with Westinghouse, granting the company a $14 million sole-source contract last month for replacement parts and service at Diablo. The new equipment will be supplied to support Diablo Canyon?s fall 2005 and spring 2006 refueling outages. ?The scope and duration [of the contract] will enable PG&E and Westinghouse to further strengthen our already strong, mutually beneficial relationship,? said Michele DeWitt, vice president of Westinghouse?s RRAS division. Duke Power filed a 1990 complaint charging that Westinghouse covered up information that its generator tubing was prone to corrosion and cracking. As evidence, Duke cited Westinghouse internal memos acknowledging corrosion problems, and instructions to an employee not to disclose corrosion problems. To prevent radioactive contamination and mitigate tubing breakdown, Duke said, it made big investments in tube inspection, preventive maintenance, and repair work. Westinghouse was exonerated in the one or two cases that went to trial, and other cases were settled because Westinghouse prefers to work with customers, according to Vaughn Gilbert, spokesperson for the company. The material currently used for steam generators is different from that used for the generators in question, he added. ?Such measures have required and will require costly plant shutdowns, and, when enough tubes are removed from service, or when it becomes uneconomical to repair them, the steam generators will need to be replaced,? said Duke. According to David Lochbaum, nuclear safety engineer for the Union of Concerned Scientists, the Tennessee Valley Authority and two plants owned by First Energy are among entities that have filed complaints against Westinghouse on grounds that steam generators were defective. Some of the complaints were settled for products or services from the manufacturer, said Lochbaum. While PG&E is already in the thick of CPUC proceedings, Edison just began a similar pursuit with an application for cost recovery to replace original steam generators at SONGS units 2 and 3. The utility, as the majority owner of these units, wants to recover construction financing costs of about $112 million as they occur. San Diego Gas & Electric is another co-owner of SONGS units 2 and 3. On top of these costs, Edison calculates that its portion of the price tag for replacement generators will be about $510 million. Additionally, it wants $83 million to dispose of old generators. The utility has determined that the current generators may not be reliable past 2010. SONGS units 2 and 3 are combustion engines that were not produced by Westinghouse.

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PG&E?s $706 Million Nuke Investment Faces Opposition; Edison Floats Similar Plans

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