Will San Onofre shutdown affect rates?

Laguna Beach residents will probably have to wait several months to find out whether their electricity rates will change as a result of the San Onofre Nuclear Generating Station’s closure.

Southern California Edison has already raised rates and San Diego Gas & Electric plans to raise rates, as both do periodically, but the increase for Edison customers may change and the amount of the SDG&E increase will depend on whether the companies get approval to reduce costs that previously went to operate and maintain the San Onofre station.

The California Public Utilities Commission, which regulates power in the state, heard testimony from both Edison and San Diego Gas & Electric on how the shuttered nuclear plant has affected the businesses.

“A lot has not been resolved yet,” SCE spokeswoman Maureen Brown said.

Edison serves about 12,300 residents and businesses in Laguna (nearly half the city’s population), while San Diego Gas & Electric has 122,000 customers in south Orange County. It wasn’t immediately known how many of those customers live in Laguna Beach.

Commissioner Michael Florio is overseeing the utilities commission’s investigation and asked SCE and SDG&E to propose San Onofre-related costs that could be removed from rates immediately to benefit consumers, SDG&E spokeswoman Stephanie Donovan wrote in an email.

Rates for SDG&E customers will increase Sept. 1 following regulatory approval of the company’s general rate case in May. The increase was pushed to September to avoid the hot summer months when electric bills are typically high, Donovan said.

In response to Florio’s request, SDG&E, which owns 20% of San Onofre, filed a motion to remove $36 million of the authorized rate increase — the portion attributed to the nuclear plant, according to Donovan.

The company also proposes returning to customers $25 million to $30 million, SDG&E’s share of operating and maintenance costs at San Onofre, Donovan said.

“We have made a proposal, but to date we have been given no direction from the commission on how to proceed,” Donovan said.

Edison shut down San Onofre’s Unit 3 steam generator in January 2012, when radioactive coolant leaked in one of the heat transfer tubes, according to Brown. Later inspections revealed excessive wear to tubes. At the time, wear was found in Unit 2 when it was taken off-line for a planned outage.

SCE retired both units June 6 because of uncertainty about when the Nuclear Regulatory Commission would finish a review of the company’s restart plan for San Onofre, Edison International’s chief executive, Ted Craver, said during the company’s second-quarter earnings teleconference Aug. 1.

Edison, which owns 78% of the San Onofre station, submitted a restart plan to the NRC in October 2012.

A month later, the state utilities commission launched a formal investigation to determine, among other things, whether Edison and San Diego Gas & Electric could recoup from ratepayers the cost of replacing steam generators and buying power elsewhere when San Onofre was off-line, as well as operations, maintenance and seismic study expenses.

Edison is seeking reimbursement of $304 million — its share of $388 million — to purchase energy while San Onofre was off-line through a policy with Nuclear Electric Insurance Ltd., though not all claims have been filed, Craver said.

Portions of the facility are still needed to keep the used fuel safe and secure and therefore should be included in rates, according to testimony Edison submitted July 22 to the PUC, Brown said.

The commission will hold evidentiary hearings for four days in October at its San Francisco office and is expected to rule on the matter in February, according to a July 31 utilities commission letter provided by Brown.

Edison is also involved in a separate dispute with Mitsubishi Heavy Industries Ltd., which made the steam generators.

Edison officials in a news release allege Mitsubishi failed to repair the Unit 3 steam generator “with due diligence.”

Edison filed a Notice of Dispute on July 18 that claims Mitsubishi, as designer and manufacturer of the steam generators, is responsible for “enormous harm its failures have caused to California ratepayers, Edison and other San Onofre owners.”

Craver did not specify the amount of damages Edison is seeking from Mitsubishi.

The companies have 90 days to resolve the claims; if they can’t come to an agreement, the matter could go to binding arbitration, Craver said.

Mitsubishi says in a response posted on its website that Edison supervised the generators’ design and formation in accordance with established codes and standards.

“The allegations and demands made by SCE in its Notice of Dispute disregard the history of the contract negotiations and performance and are factually incorrect, legally unsound and inappropriate,” Mitsubishi said. “Mitsubishi will aggressively defend itself by accurately representing the facts involved, and will take any and all actions necessary to protect its rights.”

Edison has costs associated with severance benefits paid to laid-off workers, the termination of purchase contracts for nuclear fuel, and losses on excess inventory, Craven said.

The company plans to lay off 900 of its 1,500 workers at San Onofre by the end of August, Brown said.