No new San Onofre deal — even with help from NFL concussion negotiator

San Diego Union-Tribune

Aug. 15, 2017 12 PM PT

The best efforts of a high-profile mediator and months of closed-door negotiations failed to secure a new agreement in the multibillion-dollar dispute over paying for the premature closure of the San Onofre nuclear plant.

Lawyers representing all sides in the long-running investigation told the California Public Utilities Commission on Tuesday that they could not strike a deal to more fairly divide the costs between utility customers and company shareholders.

The impasse means consumer groups and utility attorneys will return to state regulators, who will be asked to revisit — or reaffirm — their 2014 decision allowing Southern California Edison and minority plant owner San Diego Gas & Electric to charge customers for 70 percent of the premature closure costs, or about $3.3 billion.

It also means Edison and SDG&E customers will keep paying millions of dollars a month for a power plant that has not produced any electricity since 2012.

“The commission should adopt SCE’s primary recommendation and affirm the settlement without change,” Edison lawyers told regulators.

San Diego consumer attorney Michael Aguirre, whose federal lawsuit prompted the commission to order the sides into settlement negotiations, said the utility’s decision rejecting any revisions to the agreement means the parties will return to court sooner rather than later.

“This opens the door for a complete disgorgement of the $3 billion that Edison has wrongfully taken from customers, and the stoppage of any collection of future funds,” Aguirre said. “It allows for complete justice to be done for ratepayers.”

The state utilities commission ordered Edison into a series of meet-and-confer sessions with Aguirre and other lawyers representing consumers — a decision prompted in part by the U.S. 9th Circuit Circuit Court of Appeals, which agreed late last year to hear Aguirre’s appeal of the settlement deal.

The parties spent dozens of hours at no fewer than seven face-to-face meetings and multiple telephonic discussions over recent months in secret negotiations aimed at revising the commission’s 2014 decision assigning closure costs.

In March, both sides agreed to retain well-known mediator Layn Phillips to broker discussions. Phillips gained national attention in 2013 when he negotiated a $765 million deal between National Football League players and team owners to pay for concussion treatment and other on-field player injuries.

Aguirre filed a motion with the federal appeals court on Tuesday requesting a that a hearing be scheduled for oral arguments in the litigation.

“Our goal is to take the case to a fair forum,” Aguirre said.

Other parties to the settlement negotiations included The Utility Reform Network, the Alliance for Nuclear Responsibility, Women’s Energy Matters and the commission’s Office of Ratepayer Advocates.

In its submission to regulators, the Alliance for Nuclear Responsibility said Edison’s disclosure in 2015 that it secretly discussed settlement terms with the former utilities commission president at a Warsaw hotel two years earlier tainted the subsequent negotiations between Edison and two consumer groups.

“SCE utilized its unique knowledge of Commission President (Michael) Peevey’s position to negotiate terms significantly more generous to its shareholders than those outlined by Peevey in Warsaw,” Alliance lawyer John Geesman wrote.

According to an analysis he performed, the deal Edison subsequently negotiated with The Utility Reform Network and the Office of Ratepayer Advocates saved the plant owners up to $1.4 billion more.

The discussion between Edison and Peevey is part of a long-running criminal investigation by the state Attorney General’s Office into potential corruption within the utilities commission.

Notes of the secret meeting between Peevey and former Edison executive Stephen Pickett were discovered during a search of Peevey’s home in January 2015.

Edison continues to maintain that the agreement approved by the commission is fair to both ratepayers and company shareholders.

“The settlement is appropriate and should stand,” company president Ron Nichols said in a statement. “It ensured our customers do not pay for the faulty steam generators from the time they failed and the plant was no longer providing power.”

In its filing with the commission, SDG&E said regulators should close the proceeding because The Utility Reform Network and the Office of Ratepayer Advocates cannot show that the Warsaw meeting adversely affected the deal they agreed to in 2014.

“Not a single party has demonstrated that the Amended Settlement Agreement fails to reflect a compromise solution within the range of litigation positions,” SDG&E lawyers stated.

San Onofre closed amid a radiation leak in January 2012, caused by a replacement steam generator project that suffered abnormal tube wear. The $680 million upgrade was supposed to add up to 40 years to the life of the plant but instead brought its demise.

Edison blamed the design errors on its contractor, Mitsubishi Heavy Industries of Japan, and sued the company in 2013. Earlier this year, an international arbitration court ruled Edison failed to prove its $8.9 billion claim alleging negligence, fraud and willful misconduct.

The judges said Edison took unreasonable positions with Mitsubishi in discussing the plant failure and proved by its actions that it was “not seriously interested” in repairing the facility.

The arbitration panel awarded Edison $125 million in damages — just under the cap included in the contract — and ordered the utility to pay the $58 million Mitsubishi spent on the litigation.

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