Edison blames Mitsubishi for steam generators at San Onofre; likens them to ‘lemon’ autos

In what could mark the start of a lengthy battle, Southern California Edison (SCE) said July 18 it has served a formal “notice of dispute” that blames Mitsubishi Heavy Industries, for “defective” steam generators that ultimately resulted in early retirement of San Onofre Nuclear Generating Station (SONGS).

The Edison International (NYSE:EIX) subsidiary seeks to hold MHI and Mitsubishi Nuclear Energy Systems accountable for designing and manufacturing defective replacement steam generators. The power company says the multi-million-dollar equipment went bad long before expiration of the 20-year warranty.

San Onofre Units 2 and 3 have been out of service since January 2012 when one of the replacement steam generators (RSGs) made by Mitsubishi experienced a radioactive coolant leak after only 11 months of operation. The vendor had told SCE to expect the components to run safely for 40 years.

Investigation by the Nuclear Regulatory Commission (NRC) and Mitsubishi itself suggest the wear was caused by flow-induced vibration, SCE said.

“Edison spent hundreds of millions of dollars to investigate, repair and keep SONGS in a state of readiness for potential restart,” SCE said. In addition the San Onofre owners were forced to spend extensively to purchase power to serve customers.

SCE also said that roughly 1,000 workers will be losing their jobs as a result of the nuclear plant shutdown.

Edison petitioned NRC for permission to restart the less-damaged unit. “But more than 16 months after the leak, Mitsubishi had not even presented a viable proposal to solve the serious problems it created,” SCE alleges.

“Our action is about making sure that Mitsubishi takes responsibility for providing the defective steam generators that led to the closing of SONGS,” said SCE President Ron Litzinger.

Although Mitsubishi warranted the generators would operate reliably for 20 years, SCE was required to take San Onofre 2 and 3 offline in January 2012 when one of the Mitsubishi steam generators experienced a radioactive coolant leak after less than a year of operation. Although its contract with SCE required Mitsubishi to repair the RSGs “with due diligence and dispatch,” SCE’s notice alleges that Mitsubishi failed to do so.

Filing is first step in arbitration

The notice of dispute is a procedural first step that starts the dispute resolution process spelled out in the MHI contract. The notice triggers a 90-day response and obligation for MHI to remedy the situation or the resolution process moves into binding arbitration, as provided for in the contract, an SCE spokesperson said.

Facing continued uncertainty about restoring SONGS to service at any level of power, SCE permanently retired the plant as of June 2013. SCE alleges that Mitsubishi, as designer and manufacturer of the faulty components, is responsible for the enormous harm its failures have caused to California ratepayers, SCE, and the other SONGS owners.

In addition to Southern California Edison, Sempra Energy (NYSE:SRE) subsidiary San Diego Gas & Electric (SDG&E) and the city of Riverside.

The utility first issued a request for proposals for replacement steam generators in late 2003. Mitsubishi was among the most established engineering firms in the world, SCE said.

When SCE contracted with Mitsubishi to replace the SONGS steam generators, it did so to extend the life of San Onofre. SCE wanted the plant to continue to provide safe, reliable and affordable power to over 1.4 million homes in Southern California.

However, SCE’s notice claims that Mitsubishi seriously breached the contract, “totally and fundamentally” failing to deliver what it promised. SCE alleges that Mitsubishi grossly failed to appropriately model the thermal hydraulic conditions in the steam generators, including the relative wetness of the steam/water mix or “void fraction” — and the speed of the steam/water flow within the steam generators.

The notice of dispute claims that for over 16 months, SCE has asked Mitsubishi to make things right, but Mitsubishi failed to live up to its contractual obligations. SCE invoiced Mitsubishi for the money SCE was forced to spend investigating and attempting to repair the RSGs, but SCE claims that Mitsubishi has refused to even acknowledge responsibility for any of these costs, even after receiving thousands of pages of documents in support.

In the notice, SCE argues that limitations on Mitsubishi’s liability set forth in the Contract do not apply because of contractual exceptions and because of provisions of California law. Mitsubishi, like the manufacturer of a “lemon” automobile, was unable to fix the defects in its product because they were so fundamental and pervasive. In this circumstance, SCE claims that the limitations are not enforceable, and Mitsubishi is therefore responsible for the full measure of damages incurred by SCE, the other SONGS owners and their customers.

The 23-page notice was filed with Mitsubishi’s office in Virginia. Parts of the documents concern financial specifics have been redacted.

About Wayne Barber 4201 Articles
Wayne Barber, Chief Analyst for the GenerationHub, has been covering power generation, energy and natural resources issues at national publications for more than 20 years. Prior to joining PennWell he was editor of Generation Markets Week at SNL Financial for nine years. He has also worked as a business journalist at both McGraw-Hill and Financial Times Energy. Wayne also worked as a newspaper reporter for several years. During his career has visited nuclear reactors and coal mines as well as coal and natural gas power plants. Wayne can be reached at wayneb@pennwell.com.