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Settlement Reached on Closed California Nuke Plant

In a move that, longer term, will impact California's network of natural gas-fired electric generation plants, a multi-billion-dollar settlement was reached Thursday among the two principal utility owners, state regulators and consumer representatives for handling utility customer charges tied to the closed San Onofre Nuclear Generating Stations (SONGS) in Southern California.

As part of a pending rate case on SONGS filed by majority owner/operator Southern California Edison Co. (SCE) and Sempra Energy's minority (20%) owner, San Diego Gas and Electric Co. (SDG&E), a settlement was reached giving back $1.4 billion to utility ratepayers. SCE, SDG&E, the California Public Utilities Commission's (CPUC) independent Office of Ratepayer Advocates and consumer watchdog group The Utility Reform Network (TURN) made the deal as a result of an all-party settlement conference.

The settlement now goes to the five-member CPUC for review and a decision on the agreement that Ted Craver, CEO of SCE parent company Edison International, called a "balanced outcome" effectively resolving all pending regulatory proceedings at the CPUC related to the failed steam generators and subsequent 18-month outage that led to SCE's decision to close SONGS last year (see Daily GPI, June 10, 2013).

Over the past nine months, utility and state energy officials have been anticipating a long fight over the assessment of the costs of the nuke plant's failure and eventual closing and decommissioning. At the same time, they have struggled with planning for the long-term loss of the region's major baseload power source (see Daily GPI, May 29, 2013).

In a filing to the federal Securities and Exchange Commission, SCE said that "the parties to the settlement have agreed to exercise their best efforts to obtain CPUC approval." If the settlement is approved, SCE and SDG&E will not be allowed to recover in rates their capitalized costs for the steam generator replacement project as of Feb. 1, 2012 when both units at SONGS were taken out of service and never returned to operation.

Under the settlement, utility customers of SCE and SDG&E will get refunds and what Craver called significant reductions in utility revenue requirements. "It also removes a key uncertainty for Edison shareholders by determining the allowable cost recoveries related to SONGS," he said.

CPUC President Michael Peevey said the settlement will now come before the CPUC, which will hold public hearings before considering whether to approve the deal. Commissioner Mike Florio said the settlement, if approved, will save "another two years of litigation and offer ratepayers a more expeditious relief."

TURN staff attorney Matthew Freedman called the proposed settlement "a huge win for consumers," holding utility shareholders "accountable for the fiasco at SONGS and expediting refunds to consumers."

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