Who Should Pay For Defective San Onofre Generators?

Proposed settlement requires Edison to pay for its own mistakes

COSTA MESA – When the steam generators at San Onofre Nuclear Generating Station malfunctioned in early 2012 and were subsequently shut down, the question arose of who would pay

for equipment that was generating no electricity.

The utility owners of San Onofre wanted to recoup the cost of the generators. Customers didn’t want to pay. And Mitsubishi Heavy Industries, which manufactured the faulty equipment, didn’t seem likely to pony up.

Meanwhile, for the more than two years since the plant stopped operating, electricity customers have continued to foot the bill for it.

Who will pay for what, and how much, is the subject of a proposed settlement that faced the ire of customers, government accountability groups and some environmentalists Monday at a meeting organized in Costa Mesa by the California Public Utilities Commission to get public opinion on the settlement.

At stake as part of a settlement proposed by Southern California Edison and San Diego Gas & Electric – the two utilities that own the lion’s share of San Onofre – are billions of dollars either customers or the utilities and their investors will have to pay.

Not everyone is for the settlement negotiated between the utilities, ratepayer advocates and at least one environmental organization. The settlement has electricity customers paying $3.3 billion of a possible $4.7 billion bill, while the utilities pay $1.4 billion. Refund processes are also included to give electricity customers most of the proceeds from the sale of nuclear fuel and the equipment at the plant, in addition to a portion of any money won in arbitration from Mitsubishi for the faulty generators.

Customers, according to utilities officials, will pay for the electricity they used after the generators were taken offline – electricity the utilities purchased from sources other than San Onofre. But they will not pay for the steam generators themselves from the date they went out of service. The cost of other investments in the San Onofre plant, incurred before the steam generators went down, will continue to be paid for by customers.

The plan isn’t favored by some ratepayers.

At Monday’s meeting, speakers hurled accusations of backroom deals among utilities officials and regulators. A mixture of residents, environmentalists and other residents vented dismay at a settlement they saw as unfair to ratepayers.

“Settling now benefits only the utilities, not the ratepayers,” said Ray Lutz, founder of the Citizens’ Oversight Projects, which has staked out a position against the settlement. “It’s a $3.3 billion cover-up and the executives are getting away with their take.”

Glenn Pascall, the chairman of the Sierra Club’s San Onofre task force, said Mitsubishi should foot the bill for the faulty equipment.

“It is absurd on its face to make ratepayers responsible,” he said, to applause from many of the more than 75 people in the audience.

Many, however, were satisfied with the settlement. A wide array of representatives from area chambers of commerce and various community groups spoke in favor it, praising it for possibly bringing negotiations to an end.

Southern California Edison described the settlement as “fair and reasonable,” and the state Office of Ratepayer Advocates, which was involved in the settlement negotiations, praised the settlement for not saddling customers with paying for the steam generators themselves.

“This is not a bailout” for the utilities, said Mark Pocta, the program manager at the Office of Ratepayer Advocates.

The Utility Reform Network, a ratepayer advocacy group also involved in the settlement negotiations, said that in some circumstances, pursuing litigation can get utility customers additional cash. But not this time, said Mark Toney, the group’s executive director.

“We believe it is better to take the money now, rather than ratepayers rolling the dice for later,” he said.

The Public Utilities Commission did not make any decisions on the settlement Monday. An official decision is expected late this summer or early this fall.