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Rebuke For PUC as Consumers Get Half a Win

By Tom Elias

Thomas B. Elias, Columnistc

The bottom line on the 2012 shutdown of the San Onofre Nuclear Power Station was that by all sensible logic, consumers should never have had to pay anything for its eventual scrapping.

And yet, customers of two of the three largest electric utilities in California have paid for its closure every month since early 2014, when the state Public Utilities Commission – without so much as a public hearing – assessed consumers almost 70 percent of the $4.7 billion costs. So far, customers of the Southern California Edison Co. and the San Diego Gas & Electric Co. have paid more than $2 billion.

But the incident has ended up as the first time in modern memory where the scandal-ridden PUC essentially admitted a mistake of billion-dollar proportions. This one resulted from a well-documented secret meeting during a 2013 trade conference in Poland which saw Edison executives and former PUC President Michael Peevey agree on terms of the 2014 decision and evade public hearings. An ongoing criminal investigation has so far yielded no indictments.

The monthly payments by consumers will now end, under terms of a new settlement agreed to early this month by Edison and several consumer groups. Customers will save about $873 million over the next four years, eliminating the “nuclear decommissioning charges” item on their monthly bills. The average customer will be spared paying a total of more than $100.

The new deal should serve as a warning to both the PUC and other major California utilities like Pacific Gas & Electric Co. and the Southern California Gas Co. that commission decisions are not necessarily final and can be altered if consumer interests are sufficiently persistent and if those decisions are not reached with integrity.

Most persistent in pursuing cancellation of the secretive earlier settlement were former San Diego City Attorney Mike Aguirre and his law partner Maria Severson, who endured frequent mistreatment from PUC commissioners as they represented a group called Citizens Oversight in pursuing the new deal.

“Consumers should feel good about not paying for this anymore,” said Aguirre. “But we’re well aware that stopping future collections is not the same as recovering all the money that’s been collected.”

In all, consumers who were assessed about 70 percent of the total shutdown costs in the original settlement now have paid about 53 percent of those expenses and won’t pay more.

That doesn’t alter the moral reality that in a perfect world, consumers would have paid nothing beyond the approximately $500 million worth of replacement power the companies provided after San Onofre was disabled.

This morality is clear because the plant had to be closed due to failure of a steam generator built by Mitsubishi Heavy Industries whose design Edison knew could fail.

In a 2004 letter to Mitsubishi executives, Edison Vice President Dwight Nunn wrote that “I am concerned that there is the potential that design flaws could be inadvertently introduced into the steam generator design that will lead to unacceptable consequences (e.g. tube wear and eventual tube plugging). This would be a disastrous outcome…”

Despite that foreknowledge, Edison installed a steam generator that produced precisely the “disastrous outcome” of which Nunn warned, leading to closure of San Onofre many years before its lifespan was expected to end. Edison later sued Mitsubishi for the full costs of the shutdown, but got only $125 million, a small fraction of what it sought.

Since consumers had nothing to do with the conduct of either Edison or Mitsubishi, it made no sense for them to pay any of the decommissioning costs. But they will not be getting back what they’ve already paid.

The new settlement thus represents a sort of compromise, with consumers ending up out only about two-thirds of what the first settlement called for. It also spells relief for Edison, whose corporate fortunes have been uncertain as long as the San Onofre case hung over it.

But it’s a defeat for the PUC and its current president, Michael Picker, who voted for the 2014 deal and later pledged transparency, while steadfastly refusing to explain his reasoning, even to legislative committees demanding details. The PUC also faces the possibility of an FBI investigation of this entire fiasco.

California Public Utilities Commission (CPUC)
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