Challenges PUC Staff’s Finding of ‘Imprudent’ Management : Edison Disputes San Onofre Study

Southern California Edison will file with the Public Utilities Commission today a 17-foot stack of evidence sharply challenging a PUC staff finding that “imprudent” management added $762 million to construction costs at San Onofre Nuclear Power Station in northern San Diego County.

Edison’s rebuttal includes arguments that the PUC staff’s analysis was “fatally flawed” and “illogical.” The commission’s “public staff,” which represents utility customers, recommended in May that shareholders--not customers--pay $762 million of the $4.5-billion cost of building San Onofre’s Units 2 and 3. That sum, which exceeds Edison’s 1984 earnings of $732.4 million, would be shared with San Diego Gas & Electric, Edison’s 20% partner.

The commission begins six months of hearings Aug. 9, with a decision due next August. Were the PUC to disallow any costs, Southland consumers would receive modest rebates, since current rates cover the full cost.

Edison’s counterattack argues that the San Onofre price tag is fully justified. It offers prepared testimony from, among others, William D. Ruckelshaus, twice administrator of the Environmental Protection Agency; James R. Schlesinger, chairman of the Atomic Energy Commission (now the Nuclear Regulatory Commission) from 1971 to 1973, and Victor Galinsky, an NRC commissioner from 1975 to 1984.

Edison seeks to refute the public staff’s contention that inadequate management caused 1,092 days of “avoidable” construction delay that the staff translated into $710 million of “avoidable” costs. (“Avoidable” costs of labor and materials added $52 million to the cost.)

“Frankly, their view is wrong,” Edison Chairman Howard P. Allen countered. “The most convincing” evidence that the cost was justified, Allen said in an interview, lies in comparing Edison’s cost and construction record with recently built nuclear plants.

San Onofre’s cost is 29% below the average of 35 plants constructed during its decade-long gestation, he said. Dividing construction cost by generating capacity yields a cost per kilowatt for San Onofre of $2,045, compared to an average of $2,850, Edison claims.

In his testimony, Ruckelshaus recalls the “uncertainty” of environmental regulation during the 1970s, including changing and generally stricter EPA regulations and additional requirements imposed by the California Coastal Commission, created in 1972. Uncertainty, coupled with increased seismic concerns and tighter NRC standards imposed after the Three Mile Island shutdown, made “doing more rather than less” a prudent management policy in meeting safety and environmental standards, he claims.

Galinsky seeks to pick apart the PUC staff’s contention that “imprudence” caused “avoidable delays.” A “fatal flaw” in that analysis, he claims, stems from assuming that the NRC “would have licensed the unit whenever it was completed.” But licensing could not have been completed that early, he said, which would have left the finished plant idle.

The San Onofre report was the first submitted by the PUC’s new public staff, which is headed by William R. Ahern. Thus, the staff’s initial credibility will hinge on the value that the five commissioners choose to place on its recommendations. (The PUC staff previously analyzed utility submissions on behalf of the commission rather than utility customers.)