X. Contingency

The proposed settlement incorporates a 35% contingency factor for Diablo Canyon and 25% for Humboldt Unit 3.¹⁴ Fielder proposes that we should modify the settlement and use a 40% factor relying primarily on two issues: (1) the adopted contingency has been declining from a high of 50% in 1987 (24 CPUC 2d 15, 20) to 40% in 1995 (63 CPUC 2d 571, 613-614) and now the settling parties propose 35%; and (2) because of the Barnwell closure, waste storage costs are much more uncertain. (It is not clear whether Fielder would trade-off his storage estimate for his increased contingency, but there is a "belt and suspenders" element to the cautious recommendation of both.) A declining contingency, if properly determined, could reflect the improved accuracy of the decommissioning estimates based on more industry experience and being closer to the need for decommissioning. A contingency has an effect in early years of acting like an accelerated funding by over-accruing contributions in addition to its intended purpose of protecting against errors and unforeseen costs in the decommissioning estimate.

Again we are faced with a choice of whether or not to piecemeal the settlement. We will accept the settlement but in the next proceeding we direct all parties to conduct a thorough and complete research and analysis, and then err on the conservative (high estimate) side, when forecasting a contingency factor. The parties may also make any additional recommendations on the appropriate allowance for contingencies. This finding is applicable to all three utilities.

¹⁴ Contingency: (1) A future event or circumstance which is possible but cannot be predicted with certainty. (2) A provision for such an event or circumstance. (3) The absence of certainty in events. (Compact Oxford English Dictionary, online.)