California Edison announced on Friday, June 11, 2013 that it will permanently close the San Onofre nuclear plant.
Southern California Edison took out full-page ads in local newspapers warning customers that shutting down the San Onofre Nuclear Generating Station may result in “significant” costs that the plant’s designers and insurers won’t pay for. Whether ratepayers are on the hook for those costs is a decision for state regulators. And last week Edison made that argument in hearings.
The ad, which appeared in the OC Register and the LA Times, emphasized the way Edison operates in California. It explained how regulations set rates, allows utilities to recoup actual costs, and limits profit to that which comes from invested capital.
“We thought it was important to make sure our customers know about how the utility business works, and why there is such a thing as ‘cost recovery,’” Southern California Edison President Ron Litzinger said, “so that context can be considered as we go through San Onofre-related regulatory proceedings.”
On a conference call earlier this summer, Edison's CEO, Ted Craver, outlined three categories of costs associated with San Onofre:
- Replacing the power that nuclear energy would have provided;
- Operations and maintenance for the plant; and
- The investment in the plant to date.
As for who might pay, Craver named Mitsubishi (the company that designed the steam tube system at the heart of the plant's problems), Edison's insurers, shareholders of publicly-traded Edison International stock, and, of course, ratepayers.
According to records released so far, Edison hasn't told regulators how much it wants to charge ratepayers. But the new open letter offers hints:
"Everyone shares the benefits and the costs. These private investment and cost recovery principles have worked for decades, providing customers safe, reliable and affordable power. SCE’s position is that the costs associated with the shutdown of SONGS that are not recovered from Mitsubishi or through insurance should be borne fairly in accordance with these principles."
You’re wondering what “fairly” is? Edison has argued to the CPUC that ratepayers, not shareholders, should help recoup the San Onofre investment – one of the three piles of costs discussed on that conference call. Edison points out in the open letter that “if a utility asset must be retired before the end of its expected life, the utility recovers from customers its reasonable investment costs.”
Regulators are likely to limit the responsibility of customers for the other two categories of costs associated with the plant. The CPUC's Division of Ratepayer Advocates argued last year that the public shouldn't be continuing to pay for San Onofre, since it was unlikely to return to operation.
While San Onofre was down, Edison (and San Diego Gas & Electric, a minority shareholder in the plant) charged ratepayers a total of $529 million for replacement power, and spent $813 million on operating the plant while it wasn't generating electricity. As of June, that's about $1.3 billion collected from the public that may be refunded, though in what fashion, and how soon, is not clear.
The CPUC has been investigating San Onofre since last winter. Even if a negotiated settlement is reached, San Onofre's burden on Southern California Edison customers may not be resolved anytime soon.