Consumers May Pay Full Tab for San Onofre Unit : Judge Says Management of $4.5-Billion Nuclear Project Was ‘Reasonable’

Construction of San Onofre Nuclear Generating Station, which cost 10 times its original budget, was managed “in a reasonable and prudent manner,” and the owners should be allowed to charge utility customers the full $4.5-billion price tag, a state Public Utilities Commission judge recommended Friday.

That recommendation, by Administrative Law Judge Kenji Tomita, differs markedly from that of the PUC’s public staff, which represents utility customers. It recommended that up to $1.77 billion be borne by shareholders of the plant’s owners.

They are Southern California Edison, which owns a 75% stake and operates the plant; San Diego Gas & Electric, a 20% owner, and several cities.

A ruling by the five-member PUC is expected on Wednesday, because it will be the last meeting for Commissioner Priscilla Grew, who has supervised the San Onofre proceedings and will be leaving the commission on Nov. 1.

The commissioners are expected to disallow some of the construction cost, but the question is how much.

Customers of Southern California Edison and SDG&E; already pay utility rates that cover a part of the $4.5 billion spent. The final ruling will determine whether rates will have to climb higher.

Neither company would speculate about what might happen to rates, but the PUC would be expected to structure its decision so that any monthly rate increase would be modest.

For the utilities, however, the financial effect of a decision against them could be substantial.

Center of Dispute

The dispute is over what part of the construction costs on units No. 2 and No. 3 of the San Onofre facility near San Clemente was “reasonable,” and thus should be shouldered by customers, and how much was due to poor management and should be paid for by shareholders through lower profits.

When first proposed in 1970, the plant’s cost was estimated at $437 million, and the completion date was set for 1977. After a series of cost overruns similar to those that have plagued many nuclear plants, San Onofre ultimately cost $4.51 billion and was completed in 1984.

Friday’s opinion by Tomita--who is one of two dozen administrative law judges who conduct hearings on behalf of the commissioners--came after 95 days of testimony exploring the 14-year construction project.

The investigation itself took four years and cost more than $30 million.

“The administrative law judge is the man who listened to both us and Edison,” said William Ahern, director of the PUC’s public staff division, “and he apparently agrees with all of Edison’s points and none of ours.”

Unreasonable Costs

Ahern’s staff originally identified $720 million of the construction cost as unreasonable.

That was later raised to $1.77 billion, but the staff offered an alternative in which shareholders would shoulder $1.1 billion, with certain other costs shared by consumers and the companies.

Tomita said that some cost overruns were “unavoidable,” and that Ahern’s staff had failed to prove that others were imprudent. He noted, among other things, that the Three Mile Island nuclear accident in 1979 created major delays and extra costs by prompting regulators to tighten safety and environmental requirements at San Onofre.

Despite the higher-than-expected costs, San Onofre is not considered to be an expensive plant in terms of cost per kilowatt generated. Jack Thomas, an executive vice president at SDG&E;, said Tomita’s decision reflected the fact that the construction tab was “well below costs for comparable nuclear plants” built at the time.

Chairman Howard P. Allen of Edison, the majority partner and operator of the San Onofre plant, noted that Tomita is “the one person who has heard all the testimony and read all the exhibits and briefs.”

Commented Michael Shames, director of Utility Consumers Action Network in San Diego: “Just because other nuclear plant construction projects were equally dismal doesn’t mean that ratepayers should be forced to carry the costs.”