As California faces its first real heatwave of the summer, the fate of the 2,200 MW San Onofre Nuclear Generating Station (Songs) remains a mystery, and the only sure bet is that more natural gas-fired electric generation within and outside the state will have to be called upon to make up for the absence of the huge plant along the Pacific Coast in North San Diego County.

A report from the Nuclear Regulatory Commission (NRC) concluded last month that a combination of “faulty computer modeling” that did not accurately predict conditions in the steam generators and “manufacturing issues” contributed to excess wear in the components from tube-to-tube contact, which is still being diagnosed, according to Edison International CEO Ted Craver, whose Southern California Edison (SCE) utility is the majority Songs owner/operator. Craver discussed Songs on a recent 2Q2012 earnings conference call.

While reporting quarter-over-quarter earnings that were down considerably, Craver indicated that there is no timetable for restarting either unit at the troubled Songs plant, but if one were to be re-started it would likely be Unit No. 2, which has sustained less damage. The unit might be brought back at less than full capacity with short-interval scheduled outages to provide additional testing and inspection to ensure safe operation, Craver said.

In the meantime, the prolonged outage is having a definite impact on gas-fired independent generation plants in the area, particularly NRG Energy Inc.’s nearby Encina facility in North San Diego County at Carlsbad, CA. It also is drawing in the minority utility owner, Sempra’s San Diego Gas and Electric Co. (SDG&E), with the prospect of closer scrutiny of the plant by state regulators if the facility remains offline past late December.

Sempra CEO Debra Reed talked with financial analysts on an earnings conference call last week about the requirement that the California Public Utilities Commission (CPUC) launch an investigation once a nuclear unit has been out of service continuously for more than nine months. “In its assessment, the CPUC would certainly look at the circumstances around this incident, and the information we are getting is that the [state regulators] are paying attention to this, but they delayed today [Aug. 2] the investigation they were going to start.

“We would anticipate that the CPUC is going to wait and see what the outcome is on this before they look at it and the ‘reasonableness’ of the action of the parties. Since we are not the operator or one that is engaged in design of the facility, our position is slightly different than Edison’s on this plant.”

For NRG, its operating and resource adequacy plans are being tested by the continued Songs outage, particularly since the Encina plant’s resource adequacy contract with the state grid operator expires at the end of this year.

“The difficulty at Songs has had a very significant impact on Encina, both the existing plant and the prospects for Encina’s [proposed upgrade] since it is located in a very similar [geographic] position in the grid to San Onofre,” said NRG CEO David Crane (see Daily GPI, March 29). “We have been online much more this summer as a results of Songs.”

In response to an analyst’s question on whether resource adequacy value is picking up to fill the void, Crane said “there has been much greater interest in the power from Encina since Songs began its difficulties.”

The continuing uncertainty surrounding a potential return to service of Songs has “muddied the waters quite a bit and spread a cloud of uncertainty” around a major power source in Southern California, said Chris Moser, NRG’s head of trading. “I can’t say how the resource values are tracking because no one knows what is going to happen [in terms of a resolution and timetable at Songs].”

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