What has seemed inevitable for most of this year happened Friday with the announcement by Southern California Edison Co. (SCE) that it plans to retire its trouble-riddled San Onofre Nuclear Generating Station (Songs) along the Southern California coast. Utility and state energy officials increasingly have been planning for the loss of the region’s major baseload power source for some time (see NGI, June 3).
Following the decision, SCE, whose parent is Edison International (EI), said it will be taking a 2Q2013 charge of $450-650 million before taxes ($300-425 million after taxes). SCE officials, who had been hinting that the decision was coming, hope to eliminate “uncertainty” and provide for developing replacements for the 2,200 MW facility, which include new natural gas-fired generation sources.
California’s top regulator, Michael Peevey, a former SCE president, said the utility’s decision was “understandable,” but “the challenge now facing Southern California’s electric system and economy is what comes next.” As president of the five-member California Public Utilities Commission (CPUC), Peevey and his four colleagues will have to decide who bears the costs of a nearly 18-month outage at Songs Units 2 and 3.
Sempra Energy’s San Diego Gas and Electric Co., which has a 20% interest in Songs and gets 20% of its electricity supplies from the plant in the northern end of San Diego County, said SCE notified it on Thursday of its decision to close the plant. On Friday both Sempra and SDG&E submitted related 8K filings to the Securities and Exchange Commission.
Both Edison and SDG&E officials said that with various system and generation upgrades during the past two years, power supplies in Southern California should be adequate this summer (see NGI, May 6). Without knowledge of the closure decision, the federal Energy Information Administration (EIA) issued a bulletin Friday, stating that the prolonged Songs outage creates a number of challenges for the Southern California grid, but “a combination of recent capacity additions and electric system upgrades made since June 2012 will help meet peak demand this summer.”
In its 8K, SDG&E said it has a $519 million net book value on its Songs interest, and since the outages began in January 2012 through March 31, 2013, the Sempra combination utility has booked $240 million as its share of the Songs outage costs so far.
In the end, Edison International CEO Ted Craver said continuing the uncertainty surrounding the outage and subsequent filings to the Nuclear Regulatory Commission (NRC) to partially restart one of the units “was not good for our customers, our investors, or the need to plan for our region’s long-term electricity needs.”
SCE President Ron Litzinger said the utility already is “well into a summer reliability program,” and he stressed that numerous transmission upgrades have been completed in recent months since the nuclear plant went offline. Litzinger cautioned that a number of factors could still make this summer difficult, including soaring temperatures, other generation outages and wildfires impacting major transmission lines.
At a financial meeting in New York City a week ago, Craver signaled that time was running out on keeping Songs viable and he hinted that the NRC decision was being shrouded in political maneuvering.
“We’ve clearly signaled that we cannot wait indefinitely for a decision to restart Unit 2,” Craver said at the Sanford C. Bernstein & Co. Strategic Decisions Conference 2013 on May 30. “As time marches on, the fact that a safe restart of the unit would be the most economical for our customers becomes a diminishing advantage compared to other approaches, such as buying power on the open market or building new generation and transmission.”
A vocal critic of SCE and the handling of the Songs outage, U.S. Sen. Barbara Boxer (D-CA) told local news media Friday that she was “greatly relieved” by the Edison decision, concluding that Songs new steam generators — the source of the outage — have a “defective redesign and could no longer operate as intended.”
SCE did not talk about the impact on the Songs workforce but a report in the online edition of the Los Angeles Times estimated that 1,100 jobs would be lost.
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