California energy officials last week continued to wrestle with where to find more natural gas, renewables and purchased power sources for electric generation as they dealt with closing San Onofre Nuclear Generating Station (Songs). Southern California Edison Co.’s (SCE) decision to shutter the 2,200 MW facility could cost $3 billion cost for up to 50 years (see NGI, June 10).
The closure also adds another challenge for state energy planners working to overcome a once-through-cooling (OTC) ban on the use of coastal waters for up to 20 coastal power plants, most of which are natural gas-fired, according to SCE President Ron Litzinger. Meanwhile, Sempra Energy’s minority stake in Songs (20%) lessens its impact, but the San Diego Gas and Electric Co. (SDG&E) combination utility will deal with material consequences.
State and utility officials last week warned consumers in Southern California about the uncertainties of generation this summer if the weather is hotter than anticipated or if existing baseload generation plants are forced out of service. Meanwhile, SDG&E executives also have been talking about future energy supplies as Songs’ majority owner/operator.
Decommissioning would not start until 2022, when Songs current Nuclear Regulatory Commission (NRC) license expires, according to Edison International CFO Jim Scilacci. As of March 31, the market value of Songs was slightly more than $3 billion, after-tax $2.7 billion, he said. SCE maintains a decommissioning trust fund, and by 2022 that fund is expected to have sufficient dollars to pay for the decades-long process.
“The current plan for decommissioning Songs will last in excess of 40 years,” Scilacci said. “Based on our latest estimate, the approximate value of the net future cost of decommissioning Songs is approximately $3 billion. With the early shutdown, we will be evaluating the accelerated decommissioning of the plant.”
In Form 8-K filings to the Securities and Exchange Commission (SEC), Sempra and SDG&E said they are prepared to take financial hits for the closure, but unlike parent Edison, SDG&E may be allowed to recover substantially all of its sunk costs. SDG&E said “it is probable” it will recover nearly $500 million in rates, “a substantial portion of its investment in Songs and the associated costs due to date.”
SDG&E through March 31 was responsible for $107 million of the costs related to units 2 and 3, the estimated cost of purchasing replacement power to make up for its share of the nuke plant output. SDG&E estimated it will take an after-tax charge of $30-110 million in the second quarter. When Songs was operating, it provided after-tax net profits of about $15 million annually for the utility’s minority interest, it said. It is expected that SCE initially would mothball the plant, according to a report in the Los Angeles Times.
Three major new gas-fired generation plants are to be brought on line this year (see NGI, June 3). “Projections are that if we can get all of the generation inside the [Los Angeles] Basin and near the coast — in essence repowering existing facilities — the amount of new transmission would be fairly small,” Litzinger said. “But once you begin getting away from the coast and outside the basin the potential for transmission goes up very quickly.”
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