Edison reaches $400-million settlement with nuclear insurer

Southern California Edison closed the San Onofre nuclear plant after a leak in a faulty replacement steam generator.

Southern California Edison closed the San Onofre nuclear plant after a leak in a faulty replacement steam generator.

(Allen J. Schaben / Los Angeles Times)

Southern California Edison has reached a $400-million settlement with its insurer over the shuttered San Onofre nuclear plant that the utility says will help cut customers’ costs.

Edison said 95% of the money from Nuclear Electric Insurance Limited, or NEIL, “will benefit customers,” though it will not come in the form of a refund.

The utility plans to make adjustments in rates that will reduce customer bills instead. The adjustment will result in a 2% to 2.5% decline in the average customer bill beginning in January, Edison said.

Pedro Pizarro, president of Southern California Edison, majority owner of San Onofre, said the insurance settlement “represents a good outcome that is in the best interest of our customers.” Edison will receive $312.8 million, while minor owners San Diego Gas & Electric will collect $80 million, and the city of Riverside will receive $7.16 million.


Under a settlement agreement approved by the California Public Utilities Commission, customers are paying $3.3 billion for the closure of the nuclear plant while the utilities are bearing $1.4 billion of the cost.

Consumer advocates have asked the commission to reopen hearings on the settlement after findings that former PUC President Michael Peevey engaged in secret talks with Edison about the deal. An administrative law judge determined that the secret talks -- including at a swanky hotel in Warsaw, Poland -- should have been reported.

Michael Aguirre, a San Diego lawyer and one of Edison’s leading detractors over the handling of the San Onofre plant shutdown, criticized the way Edison is handling the insurance settlement. Aguirre said customers should receive a refund and not just adjustments to their bills.

“That’s a phantom recovery,” Aguirre said. “The ratepayers will not see a dime of this money.”


In addition, he said, ratepayers should get all of the insurance settlement money rather than the 95% currently earmarked for them.

“Every penny should come back to the ratepayers. Edison should have no return until the ratepayers are made whole,” he said.

Edison’s decision to adjust customer rates rather than pay a refund is similar to that of Duke Energy Corp., which reached an agreement with NEIL in 2013 over its shuttered Crystal River nuclear plant in Florida. Both plants closed because of mishaps that resulted from steam generator replacement projects.

San Onofre’s replacement steam generators proved faulty and one unit had a small leak in January 2012. Crystal River closed after the steam generator replacement led to a series of cracks in the concrete reactor containment building.


Duke Energy received $835 million from NEIL for the loss of Crystal River, which had only one reactor. Edison received $400 million and lost two reactors.

Edison spokeswoman Maureen Brown said that the nuclear power plant cases aren’t “directly comparable.”

“The NEIL settlement appropriately resolves and addresses the claims” related to San Onofre, she said.

Consumers still could receive additional benefits if Edison wins a case against the contractor on the steam generator project for the faulty product.


The contractor, Tokyo-based Mitsubishi Heavy Industries, has stated that Edison is seeking $7.6 billion for the loss of the San Onofre plant.

Whatever Edison recovers would be split 50-50 between the utilities and customers.

For more energy news, follow Ivan Penn on Twitter: @ivanlpenn