San Onofre Steam Generators

Replacement steam generators for San Onofre arrive in Oceanside in 2009. They turned out to be flawed.
The $680 million replacement generators were not subject to formal cost study.

By Jeff McDonald
Feb. 14, 2015 – Updated 4:18 p.m.

Ten years ago, when Southern California Edison wanted to replace the steam generators in its San Onofre nuclear power plant, the state Public Utilities Commission agreed to the plan without a formal review of the $680 million price tag.

By most accounts it was an unusual move, an order that then-commission President Michael Peevey signed personally.

State law requires regulators to find that capital projects are useful and the costs justified before they permit companies to pass along those expenses to ratepayers.

Edison was allowed to launch the replacement project and begin billing customers millions of dollars a year based on a similar upgrade at the Diablo Canyon nuclear plant in San Luis Obispo, along with a pledge to address a required “reasonableness review” at a later time.

Later never came.

The project design turned out to be fatally flawed. A January 2012 radiation leak at the plant north of Oceanside prompted an emergency shutdown and San Onofre has not produced a watt of electricity since.

Commission spokeswoman Terrie Prosper said it was not unusual for the commission to allow utilities to charge ratepayers the cost of financing capital projects, and that such funding doesn’t disadvantage ratepayers.

Edison said the ruling that allowed it to start charging customers for the replacement generators right away was not unusual, noting the commission approved a $680 million cap on the upgrade.

Spokeswoman Maureen Brown said the company was in the process of pursuing the reasonableness review when the utility reached a settlement that closed the matter of the plant shutdown.

“The settlement … made it unnecessary to proceed further,” Brown said.

In November, regulators approved a deal that assigns more than $3.3 billion out of $4.7 billion in premature shutdown costs for San Onofre to customers.

Critics say Peevey, who resigned in December amid a growing corruption probe, pushed the settlement through to avoid more serious scrutiny of his decision a decade ago.

“It is required under law for a capital asset to be what’s called ‘used and useful’ before a utility can collect the expenditure from the ratepayers,” said Loretta Lynch, a Bay Area lawyer and former utilities commission president.

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