The CaliforniaPublic Utilities Commission on May 9 said it will re-examine an approved settlement over the costs of closingthe San Onofre Nuclear GeneratingStation in light of improper communications that occurred between theplant's owner and a former commissioner.
Ratepayergroups have questioned the legality and fairness of the settlement following revelationsthat officers of SONGS' majority owner and operator, Southern California Edison Co., met privately with formerPUC President Michael Peevey to discuss settlement terms.
The settlementsplit SONGS' costs of$4.75 billion and left ratepayers to pick up $3.3 billion of that sum. The settlementprovided for ratepayer refunds and credits of about $1.45 billion and promised moreif SoCalEd's ongoing suit against the generator manufacturer is successful.
In ajoint ruling presidingCommissioner Catherine Sandoval and Administrative Law Judge Maribeth Bushey concludedthat the record leading up to the settlement needed be reopened and that the agreementshould be reviewed in light of subsequent ex parte disclosures and the PUC's decisionto impose sanctions for ex parte rule violations.
The PUCaffirmed eight violations of its ex parte rules and fined SoCalEd $16.7 million in December 2015.
The Alliancefor Nuclear Responsibility and the PUC's Office of Ratepayer Advocates have filedpetitions alleging that terms of the settlement agreement would have been more favorableto ratepayers if SoCalEd had properly and timely filed ex parte notices of undisclosedcommunications between Peevey and company officials. The Utility Reform Networkconsumer group also called for reopening the proceeding to reallocate SONGS' costswithout Peevey's involvement. Peevey left the commission at the end of 2014.
In aMay 9 press release Sandovalsaid, "In light of our December 2015 penalty levied against Edison for failingto disclose ex parte communicationsrelevant to this proceeding, it is prudent to review whether the settlement reachedbefore those disclosures remains in the public interest and in accordance with oursettlement rules."
Sandovaland Bushey instructed the parties to prepare their best assessment of whether theagreement is reasonable.
Sandovaland Bushey noted in their ruling that The Utility Reform Network and the Officeof Ratepayer Advocates estimated that the settlement obtained between $780 millionand $1.06 billion more for ratepayers than the terms of the ex parte discussionsand pointed out that ratepayers are receiving more than $400 million from a settledinsurance claim.
The PUCofficials directed SoCalEd to file a status report on June 2 on implementation ofthe settlement and to quantify all accounting and ratemaking actions taken to dateas well as planned actions for the future.
All partieswere directed to file briefs by July 7, assessing with "clear and logical factualand legal support" whether the settlement in their views meets the PUC's standardsfor approving settlements. Parties must also propose remedies consistent with thecommission's authority.
The rulingfocused particularly on advice letters that SoCalEd and San Diego Gas & Electric Co. filed for implementing theGreenhouse Gas Research and Reduction Program portion of the settlement. This wasa comparatively minor feature of the settlement in which SoCalEd agreed to donate$4 million annually for five years and SDG&E $1 million annually for five yearsfrom shareholder funds and agreed to work with the University of California on aresearch, development and demonstration program to deploy new technologies and methodologiesto reduce greenhouse gas emissions from generating plants. SDG&E owns 20% ofSONGS.
Adviceletters from SoCalEd and SDG&E to implement the program were rejected March11 because they failed to include payment of administrative costs by utility shareholdersand address how the utilities intended to negotiate proceeds from intellectual propertythat might arise from the research, according to Sandoval's and Bushey's ruling.
The utilitieswere directed to resubmit advice letters and directed parties to assess whetherthe program met the commission's standards. The agreement for the research programwas reached following ex parte communications between Peevey and utility officialsthat were disclosed only after the overall settlement had been approved.
SoCalEdand SDG&E are subsidiaries respectively of Edison International and Sempra Energy.
SoCalEdsaid in a prepared statement, "SCE continues to strongly believe that the settlement,reached among owners SCE and San Diego Gas & Electric Co. and consumer, environmentaland labor advocates, remains fair, lawful and in the public interest.
"SCEhas already made significant refunds to customers under the San Onofre settlement,"the utility continued. "A portion of these refunds is reflected in an 8 percentaverage rate reduction announced for this year, which also incorporates the impactsof SCE's ongoing commitment to cost containment."
's MacquarieResearch analysts said the ratings agency remained hopeful that the case would notbe relitigated and kept EIX's "outperform" rating. The analysts expressedsurprise that the PUC decided to reopen the record of the settlement, saying itwould be difficult to prove that it is no longer in the public interest.
Still,if the settlement itself was reopened, it could lead to a less favorable outcomefor ratepayers and would sharply increase regulatory risks for the utility and itsparent company, Macquarie said.