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Settling The Bill For Closing The San Onofre Nuclear Generating Station

Regulators will get a chance Wednesday to ask questions about a proposed settlement involving the closure of the San Onofre nuclear power plant.

Utilities, consumer advocates and critics are in San Francisco Wednesday to examine a proposal that breaks down the bill for the premature closure of the San Onofre Nuclear Generating Station.

They will be arguing their points before two California Public Utilities Commission administrative law judges and the lead commissioner handling the case.

The March settlement was hailed by utilities and consumer groups. Southern California Edison and San Diego Gas & Electric called it a win for ratepayers. The settlement's final cost to ratepayers is $1.4 billion below Southern California Edison's initial $4.7 billion bill.

A big chunk of that reduction is linked to the now infamous faulty steam generators.

Photo by Jelson25/Wikimedia Commons

An aerial view of the San Onofre Generating Station, May 2012

"The negotiated settlement with the consumer advocates and the utilities hammered out a difficult complex settlement agreement which is going to allow the customers not to have to pay a penny more for the faulty steam generators. Instead, the investors are going to have to pick up the rest of those costs, and customers will not have to pay for that," said Stephanie Donovan, a SDG&E spokeswoman.

That was a huge victory for the Utility Reform Network and the Office of Ratepayer Advocates.

The consumer groups are quick to point out that the steam generators were supposed to extend the life of the plant, but those generators failed and eventually prompted Southern California Edison to close the plant prematurely.

The settlement means hundreds of millions of dollars to pay off the generator replacement project will come from investors.

"It disallows any rate recovery for the replacement steam generators. Starting on February first 2012. So that's the date the outages began," said Mike Pocta, of the Office of Ratepayer Advocates.

The deal also restructures current electric rates, with ratepayers paying costs that assume San Onofre is still up and running, Pocta said. The settlement figures in the plant's closure.

But there won't be any refunds or rebates.

"The money that was overpaid, between January 2012 and when a decision is adopted will actually go to offset potential future rate increases," Pocta said.

The Office of Ratepayer Advocates and the Utility Reform Network said that rate relief is immediate and that the financial benefits diminish as time passes, which is why they want a quick resolution.

The closed-door settlement talks were difficult but productive.

"They were no pushovers, mind you. This was a tough, very complex, very lengthy discussion or debate, if you will, the whole settlement process," Donovan said.

The two ratepayer advocacy groups "were not about to let the utilities off the hook before they had their pound of flesh on behalf of customers," she said.

That pound of flesh doesn't look so substantial to critics of the proposed deal. Ray Lutz works for Citizens' Oversight, and he said ratepayers will still have to pay the $3.3 billion bill.

Photo by Katie Schoolov

Ray Lutz, Citizens' Oversight

"The settlement? You're going to be on the hook for the settlement," Lutz said. "You're going to probably have to pay 10 percent more than you would otherwise for the next 10 years. Average price, I think per meter, is about $500."

That's a charge for every electric meter in the SDG&E and Southern California Edison service area.

Lutz is also not pleased that the deal doesn't include money the utilities could be getting from their insurance carrier.

Or the potential payoff from litigation against Mitsubishi, the company that designed and built the faulty steam generators.

"They want the ratepayer to cover them first, then work on these other things and then give some back to the ratepayer," Lutz said. "We're saying we don't want any part of it. We'll pay what we think is fair. You guys take care of everything else. And that's the way it's been done at the commission for every other failed engineering project."

Lutz is not happy that investors who put up the money for the generator replacement project will still get a 2.5 percent rate of return.

He said they should get their money back, but that's all. That was the original negotiating position of the Office of Ratepayer Advocates.

Lutz said investors make money and ratepayers get a bill.

"And it is bad policy. It is bad policy because what happens, it encourages bad projects. And encourages companies to not be prudent. And to take extra risks," Lutz said.

After Wednesday's meeting, the next step will be a public hearing next month before the California Public Utilities Commission in Costa Mesa.

Commissioners will then schedule a meeting in the summer to discuss the proposal.

There are three possible outcomes. Commissioners could accept the package, ask for modifications or reject it.

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