ALJ/JPO/jva DRAFT Agenda ID #2477

Ratesetting

10/2/03 Item 30

Decision PROPOSED DECISION OF ALJ O'DONNELL (Mailed 7/15/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Joint Application of Southern California Edison Company and San Diego Gas and Electric Company for the 2002 Nuclear Decommissioning Cost Triennial Proceeding to Set Contribution Levels for the Companies' Nuclear Decommissioning Trust Funds and Address Other Related Decommissioning Issues.

Application 02-03-039 (Filed March 21, 2002, amended June 17, 2002)

Carol Schmid-Frazee, Attorney at Law, for Southern California Edison Company, and Steven C. Nelson, Attorney at Law, for San Diego Gas and Electric Company, applicants.

Gregory Heiden, Attorney at Law, for the Office of Ratepayer Advocates, James Adams, for the Surfrider Foundation, Bob Finkelstein, Attorney at Law, and Bill Marcus for The Utility Reform Network, interested parties.

TABLE OF CONTENTS

Title Page

O P I N I O N 2

I. Summary 2

II. Background 3

III. Overview 5

A. SCE 5

B. SDG&E 5

IV. Utility-Specific Issues 5

A. SDG&E 2&3 Decommissioning Cost Estimate 5

B. Palo Verde Decommissioning Costs 7

V. SONGS 1 Decommissioning 9

A. $91 Million Incurred Costs for Decommissioning 9

B. SONGS 1 Decommissioning Work Remaining as of December 31, 2001 10

C. Use of The Tax Benefit Created When Non-Qualified Trust Funds are Expended 11

VI. Common Issues 13

A. Rate of Return 13

B. Escalation Rate 17

C. LLRW Burial Costs 22

D. Contingency Factor - SONGS 2&3 25

E. Contingency Factor - Palo Verde 25

VII. Conclusion 27

VIII. Rate Proposal 28

IX. Procedural Matters 29

X. Comments on the Draft Decision 29

XI. Assignment of Proceeding 29

Findings of Fact 29

Conclusions of Law 35

ORDER 38

Attachment A
Attachment B

O P I N I O N

I. Summary

The purpose of this nuclear decommissioning cost triennial proceeding (NDCTP) is to set the annual revenue requirements for the decommissioning trusts for nuclear power plants owned by Southern California Edison Company (SCE) and San Diego Gas and Electric Company (SDG&E) (collectively, the utilities).

SCE requests continuation of its current annual revenue requirement of $25.0 million for San Onofre Nuclear Generating Station Units 2 and 3 (SONGS 2&3), and Palo Verde Nuclear Generating Station Units 1, 2, and 3 (Palo Verde).

SDG&E requests an annual revenue requirement of $11.534 million for SONGS 2&3.

By this decision, we set the annual revenue requirement for SCE at $32.848 million for 2003. This results in a $7.848 million increase from its currently authorized revenue requirement. For SDG&E we set the annual revenue requirement at $6.692 million for 2003. This results in a $1.692 million increase over its currently authorized annual revenue requirement. The reasons for the differences between the requested and adopted numbers are different adopted rates of return for the trusts, cost escalation rates, contingency factors, and low level radioactive waste (LLRW) burial costs.

In addition to the above revenue requirements, we find the San Onofre Nuclear Generating Station Unit 1 (SONGS 1) decommissioning work completed as of December 31, 2001 ($91 million) reasonable, find the utilities' estimate of SONGS 1 remaining decommissioning work ($531 million) reasonable, and authorize the utilities to use the tax benefits retained in the non-qualified trust fund for SONGS 1 to fund decommissioning work on that plant.¹