Deal left ratepayers to pay most of cost for premature shutdown of failed nuclear power plant
State utility regulators on Monday reopened the agreement they approved in 2014 that assigned ratepayers the lion’s share of the multibillion-dollar cost for premature shutdown of the failed San Onofre nuclear power plant.
The action represents a significant turnaround for the California Public Utilities Commission, which stood behind the settlement agreement for 18 months amid growing criticism — even from parties to the $4.7 billion deal — that the process and the outcome were stacked against the public and for utility companies.
Reopening the settlement terms could mean a better deal for utility customers. It could also prove an important test of the commission’s latest posture toward the power companies it regulates, as those companies have continued to say the deal was good for ratepayers and the process was above-board and open to the public.
To approve such a settlement, the commission must find that it is “reasonable in light of the whole record, consistent with law, and in the public interest.”
Since the commission approved the settlement, there have been repeated revelations about undisclosed meetings that helped form its substance — calling into question whether it was properly deemed reasonable in light of the whole record.
Commissioner Catherine J.K. Sandoval and Administrative Law Judge Maribeth Bushey said, in taking action to reopen the settlement, that it needs to be held up anew against that standard.
“The parties should prepare their best assessment of whether the settlement agreement is reasonable in light of the record, consistent in the law and in the public interest,” their order states.
The order also immediately prohibits any further ex parte, or private, communications between parties to the proceeding and commissioners or their advisers, even on procedural matters.
“Such procedural communications may be directed to the assigned administrative law judge,” the order stipulates.
Backchannel communications between utility executives and regulators are at the heart of separate state and federal criminal investigations into commission practices.
The criminal cases have been open since 2014 but no charges have been filed. The commission is proposing to spend more than $12 million of ratepayer funds on private lawyers to respond to subpoenas, search warrants and demands from investigators.
Commission spokeswoman Terrie Prosper declined to say what prompted the change of heart on Monday.
Majority plant owner Southern California Edison issued a statement saying that company officials are reviewing the commission ruling but Edison nonetheless stands by the 2014 deal resolving costs related to closing the San Onofre Nuclear Generating Station.
“SCE continues to believe the SONGS settlement remains in the public interest,” the statement said.
San Diego Gas & Electric owns 20 percent of the power plant on the north San Diego County coast, which closed amid a radiation leak in January 2012 after a faulty replacement steam generator upgrade.
The 9-page ruling from the commission calls on Edison to file a status report by June 2 detailing what the utility has done to date as far as implementing the 2014 order.
The order also directs other parties to file briefs by July 7 discussing the adopted settlement. By July 21, all parties were directed to submit reply briefs and recommendations about how the case should proceed.
San Diego consumer attorney Michael Aguirre, who sued the commission to overturn the agreement, said the commission decision speaks to the perseverance of activists like himself and others.
“This proves that when a small group of people come together to fight to the end, justice can be done,” he said on Monday.
Aguirre said it will be difficult to defend the settlement terms as they were approved in 2014 because the agreement was modeled on a framework sketched out in a private 2013 meeting between then-commission President Michael Peevey and an Edison executive in a Warsaw, Poland, hotel.
“There’s no case to be made for the settlement,” Aguirre said. “They have to go back to square one. There’s no more Warsaws, so this will have to be done openly and on the record. We can win a fair fight.”
The commission ruling comes 18 months after regulators unanimously approved the settlement, reached between Edison and the San Francisco consumer group the Utility Reform Network or TURN.
TURN staff attorney Matthew Freedman said the improper communications cast a pall over the settlement deal.
“TURN looks forward to the opportunity to fight for better results for consumers and to force the shareholders of Southern California Edison and San Diego Gas & Electric to assume a greater share of the costs of the debacle at San Onofre,” he said.
The deal was unveiled in March 2014, first portrayed publicly as a $1.4 billion “rebate” for utility customers — because that’s the amount of premature closure costs that would be covered by utility companies.
As the agreement received additional scrutiny, attention turned to the amount utility ratepayers would be funding — $3.3 billion. The deal began receiving sharp criticism from certain consumer groups.
In September 2014, the deal was amended to include $25 million for greenhouse-gas emissions research — a key deal point included on notes from the 2013 meeting between Peevey and Edison executive Stephen Pickett in Warsaw.
The climate-change research funding has been another focus of the criminal investigation of the utilities commission.
University of California, Los Angeles, researchers were in contact with Peevey about securing the $25 million in funding at least nine months before Commissioner Michel Florio publicly proposed adding the money to the agreement.
The commission’s order on Monday directs parties to the San Onofre case to weigh in on whether the greenhouse gas research funding was properly handled.
In February 2015, days after The San Diego Union-Tribune reported that the commission’s handling of the San Onofre closure had become part of an expanding criminal investigation, Edison publicly acknowledged the Warsaw meeting for the first time.
The utility said Peevey did most of the talking at the Warsaw meeting and the deal should stand because it was negotiated fairly and served all sides well.
Last spring, Sen. Ben Hueso, D-San Diego, publicly called for scrapping the San Onofre deal. Then the commission’s Office of Ratepayer Advocates suggested the plant owners should rewrite terms of the settlement and return more than $600 million to customers.
Almost a year ago, TURN repudiated the deal it negotiated and called on the commission to reopen the agreement.
In August, the judge overseeing the proceeding found that Edison had committed 10 separate violations of commission rules governing ex parte communications in open proceedings. Four months later, the commission fined the utility almost $17 million for the violations.