ALJ/MD2/hkr Date of Issuance 8/5/2010

Decision 10-07-047 July 29, 2010

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company in its 2009 Nuclear Decommissioning Cost Triennial Proceeding. (U39E)

Application 09-04-007
(Filed April 3, 2009)

Joint Application of Southern California Edison Company (U338E) and San Diego Gas & Electric Company (U902E) for the 2009 Nuclear Decommissioning Cost Triennial Proceeding to Set Contribution Levels for the Companies' Nuclear Decommissioning Trust Funds and Address Other Related Decommissioning Issues.

Application 09-04-009
(Filed April 3, 2009)

(See Appendix D for List of Appearances.)

DECISION ON PHASE 1 OF THE TRIENNIAL REVIEW
OF NUCLEAR DECOMMISSIONING TRUSTS
AND RELATED DECOMMISSIONING ACTIVITIES
FOR SOUTHERN CALIFORNIA EDISON COMPANY, SAN DIEGO GAS & ELECTRIC COMPANY, AND PACIFIC GAS AND ELECTRIC COMPANY

TABLE OF CONTENTS

Title Page

1. Summary 2 2

2. Requests 3 3

2.1. SCE and SDG&E 3 3

2.2. PG&E 6 6

3. Procedural History 7 7

4. Standard of Review 9 9

5. Settlement Agreement 11 11

6. Parties' Final Positions on Contested Issues 13 13

6.1. DRA 13 13

6.2. Fielder 16 16

6.3. The Settling Parties 17 17

7. Discussion of Contested Issues 22 22

7.1. Compliance With D.07-01-003 22 22

7.2. Approval of Decommissioning Cost Estimates 24 24

7.2.1. SONGS Units 1, 2, and 3 25 25

7.2.2. Palo Verde Units 1, 2, and 3 26 26

7.2.3. Humboldt Bay Powerplant 3 27 27

7.2.4. Diablo Canyon Units 1 and 2 28 28

7.3. Approval of Decommissioning Expenses 29 29

7.4. Rates of Return and Trust Fund Contributions 30 30

7.4.1. Equity Rates of Return 31 31

7.4.2. Fixed Income Rates of Return 33 33

7.4.3. Contributions and Revenue Requirements 33 33

7.4.3.1. PG&E 34 34

7.4.3.2. SCE 37 37

7.4.3.3. SDG&E 38 38

7.5. Other Policy Issues 39 39

7.6. Independent Panel 39 39

7.7. Reasonableness Review 44 44

8. Conclusion 49 49

9. Comments on the Proposed Decision 50 50

10. Assignment of the Proceedings 50 50

Findings of Fact 50 50

Conclusions of Law 54 54

ORDER 58 58

APPENDIX A: List of All Exhibits

APPENDIX B: Settlement Agreement

APPENDIX C: Pre-Settlement Issues

APPENDIX D: List of Appearances

1. Summary

The purposes of the nuclear decommissioning cost triennial proceedings (NDCTP) are to set the annual revenue requirements for the decommissioning trusts for the nuclear powerplants owned by Southern California Edison Company, San Diego Gas & Electric Company, and Pacific Gas and Electric Company, to verify the utilities are in compliance with prior decisions applicable to decommissioning, and to determine whether actual expenditures by the utilities for decommissioning activities are reasonable and prudent. (Decision 07-01-003.) These NDCTP proceedings were divided into two phases by an August 3, 2009 ruling which provided that issues relating to trust fund management would be considered in Phase 2.

This decision resolves all issues in Phase 1. It does not adopt the contested settlement proposed by the three utilities and The Utility Reform Network (Settling Parties). Although this is not an all-party settlement, the Settling Parties include the three applicants and The Utility Reform Network, the most active intervenor in these proceedings. The Commission's Division of Ratepayer Advocates and intervenor Scott Fielder opposed the Settlement on several grounds.

Specifically, we reject the proposed change to the reasonableness review process for decommissioning expenditures from Phases 2 and 3 of San Onofre Nuclear Generation Unit 1 and all phases of Humboldt Bay Powerplant 3 because we find the proposal is not in the public interest and is unreasonable in light of the whole record. This provision alone is of sufficient importance to the Commission that the Settlement is rejected. Instead, the Commission examined the utilities' applications using the reasonableness standard, in light of the other Settlement provisions upon which there was broad, if not complete, agreement, and the evidentiary record developed through hearings.

We find that most of the changes proposed by the Settlement are reasonable including approval of the submitted decommissioning cost estimates and expenditures, and the revised rates of return assumptions and proposed annual trust fund contributions. We also agree with all parties that certain identified areas of inquiry would assist the Commission and ratepayers in future NDCTPs, and adopt the Settlement's plan for an independent panel of decommissioning experts who could examine certain decommissioning cost issues, most importantly to identify what drives differences in cost estimates and to develop common cost reporting methods that would provide better transparency and comparability. In this decision, we slightly modify the panel's tasks, establish a process timeline that incorporates Commission and party input, and clarify the panel's funding.