When A Nuclear Plant Shuts Down, Who Pays?

California’s San Onofre nuclear plant, on the Pacific coast between San Diego and Los Angeles, hasn’t generated electricity since early 2012. That’s when both reactors were taken offline after premature wear was found on newly installed steam generators. The plant’s primary owner, Southern California Edison, ultimately chose to shutter the facility.

A thousand workers have lost their jobs — and that’s far from the only economic impact of the plant’s closure. Five-and-a-half years later, officials are still haggling over who should pay an estimated $4.7 billion in costs related to the early shutdown.

San Onofre’s 20-year decommissioning process is already paid for. Edison and plant co-owner San Diego Gas & Electric have collected more than $4 billion from customers over the decades and tucked that money away in a trust fund, as required by California law. The utilities say they won’t need to collect any more money for decommissioning.

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But that still leaves $4.7 billion in unrecovered costs for the utilities — the money Edison and SDG&E expected to make by selling electricity from San Onofre, allowing them to earn back their initial investments. The $4.7-billion figure also includes maintenance costs and nuclear fuel the utilities bought but couldn’t use, among other costs.

Pacific surf rolls in under the nuclear reactors of the San Onofre Nuclear Generating Station in northern San Diego County on April 25, 2001. (Photo: DENIS POROY, ASSOCIATED PRESS)
 Historically, ratepayers have been stuck paying the entirety of utilities’ unrecovered costs when power plants are forced to shut down early, said Matthew Freedman, an attorney at The Utility Reform Network, or TURN, a San Francisco-based ratepayer watchdog. Indeed, Edison initially asked state officials to put customers on the hook for all $4.7 billion. So when TURN helped negotiate a settlement whereby consumers would pay $3.3 billion and the utilities would pay $1.4 billion, Freedman considered it a win.

“In order to hit the utility a lot harder on these costs, you need to be ready to ask the (California Public Utilities Commission) to set a new precedent,” Freedman said. “We didn’t see much likelihood that (then-commission president) Mike Peevey was open to establishing a new precedent.”

That was three years ago. Since then, everything has changed.

In January 2015, state investigators searched Peevey’s home as part of an investigation into back-channel communications between the public utilities commission and Pacific Gas & Electric, a Northern California utility. The investigation ultimately yielded evidence that Peevey had secretly discussed the terms of the San Onofre settlement with an Edison executive, sketching out the details on a napkin at a hotel in Poland.

San Clemente Pier (Photo: Kristin Scharkey)
 In 2016, the public utilities commission agreed to reopen the settlement. Negotiations are underway. Freedman is hopeful of getting a better deal for consumers this time.

“I think there’s an understanding that if that mediation fails, that we will go back to the (utilities commission) and resume litigation,” he said.

Edison spokesperson Maureen Brown declined to comment on the reopened settlement negotiations. In a statement late last year, the utility said it “continues to believe the (original) settlement reflects an appropriate allocation of costs.”

While ratepayers across Southern California will ultimately pay billions of dollars related to San Onofre’s premature closure, the most acute economic impacts have already been felt in the plant’s backyard, in San Clemente, California.

The facility’s workforce of 1,300 has been trimmed to 300. Local businesses have also suffered, according to Lynn Wood, CEO of the San Clemente Chamber of Commerce. Contract workers would frequently be brought in for months at a time to perform routine maintenance at San Onofre, and they would stay at hotels or sign short-term leases, Wood said.

“They’d be pretty much going out to dinner every night. So we lost all that,” she said.

Sammy Roth writes about energy and the environment for The Desert Sun. He can be reached at sammy.roth@desertsun.com, 760-778-4622 and @Sammy_Roth.