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SoCal Edison, Mitsubishi Unit at War Over Nuke Plant Closure

Southern California Edison Co. (SCE) and Mitsubishi Heavy Industries (MHI) have gone to war over failed steam generators from the Japanese industrial titan that caused the closure in June of SCE's San Onofre Nuclear Generating Station (SONGS) along the Pacific Coast in north San Diego County.

Ted Craver, CEO of SCE parent company Edison International (EI) on Thursday announced a $575 million pre-tax impairment charge the giant electric utility has taken and red ink for the second quarter tied to the SONGS closing. EI reported a 2Q2013 loss of $94 million (minus 29 cents/share) compared to net income of $74 million (23 cents/share) for the same period last year.

Saying that SCE is prepared to take the dispute over the steam generators to an international binding arbitration process if necessary, Craver urged MHI to "step up and meet its obligations." SCE has filed a formal dispute against MHI, and the Japanese company not surprisingly is objecting to the Rosemead, CA-based utility's action.

At the same time, Craver said Edison will be active at the federal and state regulatory levels regarding the eventual decommissioning of SONGS, which falls under the Nuclear Regulatory Commission (NRC) and cost recovery for the process, which could take decades from the California Public Utilities Commission (CPUC).

Since the closure announcement, the CPUC has initiated a four-phase regulatory proceeding looking at all aspects of the SONGS decommissioning.

In addition, SCE will be "fully engaged" in the detailed planning by other state energy agencies of how to ensure future grid reliability without SONGS' major (2,200 MW) source of power, and that will include the future role of natural gas-powered generation, which is California's dominant source of electricity produced in the state (see Daily GPIJune 10).

"As part of the overall cost recovery process on SONGS, we are highly focused on securing recovery from MHI for its failure to provide functioning replacement steam generators that met their 20-year warranty and technical specifications," said Craver, who added that the company also will pursue a $388 million insurance claim with the Nuclear Insurance Liability Ltd. (NILL) organization.

SCE is now in the midst of a 90-day period allowed for resolving its formal dispute with MHI. If the parties fail to come to a resolution, under the terms of the contract, the issues will be submitted for binding arbitration using the process established at the International Chamber of Commerce in San Francisco.

Craver said SCE's claims against MHI center on the Japanese company supplying what the utility alleges were "faulty steam generators." In its formal dispute, SCE said MHI "totally and fundamentally failed to deliver what it promised, and its was guilty of gross negligence," adding that the utility alleges that the liability limitations in the contracts do not apply in this case.

 Craver said the utility is not specifying amounts of damages it ultimately will try to recover, but he said SCE "will pursue recoveries aggressively on behalf of customers if our disputes with MHI cannot be resolved otherwise."

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