California commission approves final San Onofre nuclear cost settlement

The California Public Utilities Commission (CPUC) on Nov. 20 approved a settlement agreement that provides consumer refunds and credits of approximately $1.45bn due to the premature shut down of the San Onofre Nuclear Generating Station following a steam generator tube leak in January 2012.

Additionally, the commission noted that there is the potential for customer recovery of costs from equipment supplier Mitsubishi Heavy Industries and nuclear insurance. The Nov. 20 decision approves an amended settlement agreement between the Coalition of California Utility Employees, Friends of the Earth, Office of Ratepayer Advocates, San Diego Gas & Electric (SDG&E), Southern California Edison (SCE), and The Utility Reform Network (TURN). The original settlement agreement was changed to require that SCE and SDG&E each equally share net litigation proceeds from Mitsubishi Heavy Industries between their respective customers and shareholders, and to improve CPUC oversight of utility implementation of the settlement, particularly as to development of the revised rates.

Under the settlement, which resolves all recovery issues related to the premature shut down of San Onofre, the utilities will stop further collection of the Steam Generator Replacement Project costs in rates, return all Steam Generator Replacement Project costs collected after Jan. 31, 2012, to ratepayers, and accept a substantially lower return on other prematurely retired San Onofre assets. In total, this reduces consumer costs by $1.45bn.

The CPUC determined that the settlement is in the public interest and is much closer to the litigation position of the Office of Ratepayer Advocates than to that of the utilities. In effect, the commission said, the compromise splits the difference 65% in favor of consumers and 35% in favor of the utilities.

“This settlement was proposed by certain parties, including consumer groups, at a time that the record of the proceeding was sufficiently developed and the CPUC could examine the reasonableness and prudency of the proposal,” said CPUC Commissioner Mike Florio, the Commissioner assigned to the proceeding, in a Nov. 20 statement. “The CPUC determined today that the settlement is reasonable in light of the whole record, consistent with law, and in the public interest.”

The settlement directs the utilities to develop a multi-year project associated with the University of California or UC-affiliated entities, funded by shareholder dollars, to spur immediate, practical, technical development of devices, methodologies, and processes to reduce emissions at existing and future California power plants tasked to replace the lost San Onofre generation. “Our decision should lead to greater attention to greenhouse gas in Southern California through a cooperative effort of the two utilities, the University of California, and local and regional governments,” said Florio.

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.