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$1.45 Billion San Onofre Settlement Approved

The California Public Utilities Commission approved it Nov. 20.

The California Public Utilities Commission has approved a settlement agreement that provides consumer refunds and credits of approximately $1.45 billion due to the premature shutdown of the San Onofre Nuclear Generating Station after a steam generator tube leak on Jan. 31, 2012. CPUC announced there also is the potential for customer recovery of costs from Mitsubishi and nuclear insurance.

The commission's decision approved an amended settlement agreement between the Coalition of California Utility Employees, Friends of the Earth, Office of Ratepayer Advocates, San Diego Gas & Electric, Southern California Edison, and The Utility Reform Network. The original settlement agreement was changed to require that SCE and SDG&E equally share net litigation proceeds from Mitsubishi Heavy Industries between their respective customers and shareholders and to improve CPUC oversight of utility implementation of the settlement.

The settlement resolves all recovery issues related to the premature shutdown, and the two utilities will cease collecting the Steam Generator Replacement Project costs in rates, return all Steam Generator Replacement Project costs collected after Jan. 31, 2012, to ratepayers, and accept a substantially lower return on other prematurely retired San Onofre assets. Together, these reduce consumers' costs by $1.45 billion.

"The CPUC determined that the settlement is in the public interest and is much closer to the litigation position of the Office of Ratepayer Advocates than to that of the utilities. In effect, the compromise splits the difference 65 percent in favor of consumers and 35 percent in favor of the utilities. Consumers pay for some costs, including power the utilities purchased for customers after the outage and undepreciated net investment in San Onofre assets, excluding the failed Steam Generator Replacement Project. However, instead of the usual authorized rate of return, the settlement reduces shareholder return on San Onofre investments to less than three percent. The effect of the reduced shareholder return is that consumers save approximately $420 million over the 10-year depreciation period," the commission's news release stated.

"This settlement was proposed by certain parties, including consumer groups, at a time that the record of the proceeding was sufficiently developed and the CPUC could examine the reasonableness and prudency of the proposal," said CPUC Commissioner Mike Florio, the commissioner assigned to the proceeding. "The CPUC determined today that the settlement is reasonable in light of the whole record, consistent with law, and in the public interest."

The settlement also directs the utilities to develop a multi-year project associated with the University of California or affiliated entities, funded by shareholder dollars, to spur development of devices and processes to reduce emissions at existing and future California power plants tasked to replace the lost San Onofre generation. "Our decision should lead to greater attention to greenhouse gas in Southern California through a cooperative effort of the two utilities, the University of California, and local and regional governments," said Florio.

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