The months-long outage at California's San Onofre nuclear power plant will easily exceed $100 million. The outlays include equipment repair or replacement costs, the expense of securing power contracts and daily electricity purchases while the plant is off line, as well as items such as increased regulatory oversight and customer-funded incentives for energy conservation.The electricity San Onofre produces—up to 2,200 megawatts at any given time—is so vital to powering daily life in San Diego and the Orange County-Los Angeles metropolitan area that government and industry officials are scrambling to secure back up sources in case the plant remains idle during a summer heat wave.
In part because of its critical role in Southern California's power grid, the California Public Utilities Commission in 2005 told San Onofre's owners they could spend $680 million (2004 dollars) to replace the plant's four massive steam generators, and recoup the costs through higher customer rates. The commission also agreed to consider additional costs up to a cap of $782 million.
The new steam generators came on line in 2010 and 2011, but the project's final bill has not yet been submitted for review. In the meantime, the steam generator investment began to sour. In late January, Unit 3 was shut down after a small amount of radiation leaked from a steam generator heat transfer tube. Further inspection revealed excessive wear on some of the 19,454 tubes in Unit 3's new steam generators. Inspection of the tubes within Unit 2, which was shut down in early January for planned maintenance, also revealed unusual tube wear. (Unit 1 was shut down in 1992 because it needed costly upgrades that were not considered cost-effective.)
San Onofre can't be restarted until the Nuclear Regulatory Commission (NRC) is satisfied that the cause of the tube damage has been identified and the necessary repairs have been made to safely operate the reactors.
The NRC and Southern California Edison (SCE), which operates the plant, have said the damage was caused by vibrating tubes knocking against each other and against the tube support structure. Investigators are still trying to determine whether the unusual wear was caused by the way the steam generators were designed, the way they were manufactured, the way they were installed, or the way they were operated. That question, once answered, could determine who pays the bill.
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| NFRC Co-Chair Norris McDonald at San Onofre in 2005 |
Electricity customers will be in the mix, too, in spite of the cost cap the CPUC imposed when the steam generator replacement project was approved. That's because Mitsubishi's warranty doesn't cover the cost of replacement power, and both SCE and SDG&E said in financial filings that they intend to include those expenses in annual filings aimed at recouping those costs from customers. This year's power purchases will be filed in early 2013 and are subject to "reasonableness" review by state regulators.
So far, the bill for San Onofre’s steam generator troubles includes:
The cost to repair or replace the four compromised steam generators: $70 million to $800 million or more.
SCE, for its part, recently told Wall Street analysts that it spent $30 million on inspection and repair costs related to the steam generators through mid-April, and that it expects its 78 percent share of the total operations-related expenses to be $55 million to $65 million. That translates into a total repair bill of $70 million to $83 million, split among SCE, SDG&E and the City of Riverside.
The cost of buying replacement power: $42 million through March 31.
When San Onofre is running, it supplies enough electricity to power 1.4 million average homes. SDG&E has said the nuclear plant provides 20 percent of its normal power supply, and SCE got 19 percent of its power from San Onofre and Arizona's Palo Verde nuclear plant. Every day San Onofre's reactors are off line, both companies have to buy replacement electricity. Electricity prices vary based on market conditions and seasonal demand, but experts estimate the cost to replace San Onofre’s power to be $750,000 to $1 million per day.
In a financial filing, SCE said it spent $30 million through March 31 for replacement power tied to the steam generator problems. That total covered 26 days when it offset the lost power from both Unit 2 and Unit 3, and 34 days when the company only bought power to replace Unit 3’s normal production. (Since Unit 2 was originally offline for a planned outage, SCE had previously purchased power to cover its down time until March 5.) SDG&E reported it paid $12 million for replacement power over the same period.
The California Public Utilities Commission reviews the purchases for “reasonableness,” but the charges are rarely debated. The bill for replacement power could be substantial, especially if San Onofre remains off line or at lower-than-usual capacity through the summer.
The cost of securing supplemental power: At least $12.5 million.
In addition to buying electricity each day to meet customer demand, SCE and SDG&E must secure commitments from power plants to supply additional energy if called upon. One such contract is with AES Corp., which has restarted two retired units at its Huntington Beach plant to make up for the San Onofre shortfall. The cost to secure that additional 440 megawatt output is about $2.5 million per month through October, according to the California Independent System Operator, the entity that manages California's electricity grid.
The cost of expanding energy conservation measures: Unknown.
State regulators recently approved a new way to reward SCE and SDG&E customers for cutting power consumption during key periods. SCE will spend $3.3 million on a new "10 for 10" program in Orange County that gives non-residential customers not already enrolled in similar programs a 10 percent bill credit in return for reducing power use by 10 percent or more between July 1 and Sept. 30, 2012. The program funding will come from customer money that was already set aside for other conservation incentives.
SDG&E will spend $6.4 million to expand its "peak time rebate" program to small commercial customers. The funding is being shifted from customer money set aside for another purpose
In addition to conservation incentives, state regulators approved using $9 million in customer funds for public service advertisements and announcements that encourage energy conservation during peak periods. The money can be used anywhere in California, but it will likely be heavily drawn upon for Southern California campaigns this summer.
The cost of stepped-up inspections from federal regulators: Unknown.
When things go wrong at a nuclear plant, the NRC sends extra inspectors to review the issue and supervise the plant operator's actions. But their work comes at a cost.
San Onofre will be billed $273 per hour for each extra NRC inspector called upon to assist with the investigation. (Inside Climate News, 5/29/2012)
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