Southern California Edison undermined its claim to billions of dollars in damages from manufacturers of the replacement steam generators that caused the San Onofre nuclear plant failure by delaying proposed repairs and then deciding to close the facility, according to an arbitration ruling.
Judges at the International Chamber of Commerce, the nongovernmental organization that arbitrates business disputes across the globe, also said Edison never proved fraud allegations against Mitsubishi Heavy Industries, the conglomerate hired more than a decade ago to design and build the giant new generators.
“Claimants, by their actions, frustrated the fulfillment of the various contractual remedies available to them, following discovery of the causes of the incident,” the ruling states. “When the claimants decided to shut down the plant without pursuing the proposed Type 1 repair or a replacement option, they must be deemed to have elected, on their own, to forego the consideration for which they had bargained.”
The plant north of Oceanside closed amid a radiation leak in January 2012, and unusual tube wear from vibrations in the steam generators was found as the cause.
Edison, which owns almost 80 percent of the plant, sought almost $9 billion in damages from the Japanese manufacturer, according to the ruling. Among other claims, it alleged “gross negligence, fraud, willful misconduct or other illegal or unlawful acts.”
The arbitration panel did not agree. Its findings were announced in March but the voluminous record was not released publicly until late Wednesday.
“The panel majority found that the failure of the steam generators was the result of an ‘unprecedented phenomenon in the industry’ and that Mitsubishi followed ‘industry design practice,’” Edison spokeswoman Maureen Brown said. “The dissenting arbitrator found that Mitsubishi was at fault for the design errors based on information that was ‘unbeknownst to Edison’ at the time.”
After a confidential proceeding that lasted more than three years, the international arbitration panel awarded Edison $125 million in damages and ordered the utility to pay $58 million in legal fees racked up by Mitsubishi.
“An outage spanning at least seven years does not constitute a repair or replacement with ‘dispatch’,” Edison argued in arbitration. “No dispute exists on this point.”
The final award from the International Chamber of Commerce was released under a special order from the California Public Utilities Commission, which has been investigating the San Onofre failure for almost five years.
Edison complied with the order Wednesday, filing a notice with the commission that it posted a redacted version of the document on its website. The award stretches over 1,100 pages.
It is not clear when or whether the unredacted document may be released publicly. Lawyers who have seen it say the redactions are not material to the judges’ findings; rather, they are specific computer codes, formulas and other data pertaining to the manufacturing process.
Many of the 1,100-plus pages contain extremely technical language from Edison and Mitsubishi and their paid consultants, aimed at boosting their respective cases before the panel.
They also include key information that sheds new light on basic aspects of the plant failure and its ongoing costs to ratepayers, who are being charged more than $3.3 billion in extra utility bills due to the plant failure.
For example, Edison disclosed that it spent $84 million on the arbitration claim, almost 45 percent more than the $58 million Mitsubishi expended. In addition to $44.5 million in attorney fees, the company hired 11 experts for $29.7 million, including $9.4 million for business and litigation consultant Keinrich Group. Those charges are passed on directly to utility customers.
In comparison, Mitsubishi spent $12.9 million on 20 experts to offer testimony in the case.
“It appears that the only beneficiaries of the costly arbitration process were outside law firms and expert witnesses hired by Edison and Mitsubishi,” said Mindy Spatt of The Utility Reform Network or TURN, a San Francisco consumer group that is a party to the commission’s San Onofre investigation. “Nothing in the arbitration decision changes our view that Southern California Edison and San Diego Gas & Electric are fully responsible for the defective design of the steam generators.”
SDG&E owns 20 percent of the broken power plant.
The arbitration record also shows Edison claimed $8.9 billion in damages as a result of the failure, a remarkable sum for a project originally estimated to cost a total of $680 million and a contract with Mitsubishi that specifically limited claims to $138 million.
Edison apparently sought $6.6 billion in damages, two-thirds of which was projected to be incurred between 2022 and 2042, when it was expected to be seeking a relicensing from federal regulators. That claim included a 40 percent markup for presumed taxes, the award states. The utility also requested $2.3 billion in decommissioning damages, over and above the $4 billion contributed by ratepayers into a special fund to pay for dismantling the plant once it was closed, the ruling noted.
Edison took unreasonable positions with Mitsubishi when it was discussing an outcome for failed power plant, the judges said. Specifically, the utility demanded that the manufacturer pick up all repair costs in full, according to the ruling. Edison’s actions also prove it was “not seriously interested” in pursuing a repair plan that would have brought the nuclear plant back online.
Lastly, it was Edison’s decision to shutter the plant for good, not the contractor, judges noted.
“Once the plant was closed by Edison, Mitsubishi was precluded from installing any such replacement option,” the arbitration panel wrote.
Edison claimed in the proceeding that Mitsubishi failed to pay its invoices in a timely manner and did not allow the utility access to all of the records it requested, the ruling shows.
According to Brown, the Edison spokeswoman, “the panel majority also found that it would have taken an extended period to engineer the repair, obtain necessary regulatory approvals and implement the proposed repair, and that SCE ‘acted reasonably’ in deciding to shut down the plant rather than continue to pursue the proposed repair.”
Mitsubishi said its client deliberately put off making decisions that would have allowed repairs to proceed. It submitted a valid repair plan as early as July 2012, within six months of the breakdown, the ruling states.
A spokesman for the Japanese manufacturer declined to comment on the ruling or its allegations.
Others involved in the proceed pending before the state utilities commission said the judges’ findings did not bode well for Edison.
“This decision represents an 1,115-page, point-by-point repudiation of SCE’s blame-the-vendor excuses,” said attorney John Geesman of the Alliance for Nuclear Responsibility, which is a party to the commission’s San Onofre case. “When adjudicators find utility conduct ‘unreasonable’ after such exhaustive review, it carries very serious consequences.”
The steam generators were installed in 2010 and 2011 after a years-long planning and design process that included a spate of detailed meetings between Edison and Mitsubishi engineers. The project was supposed to add 40 years to the lifespan of the 2,200-megawatt plant.