ALJ/JPO/hkr DRAFT Agenda ID #5051
Ratesetting
Decision PROPOSED DECISION OF ALJ O'DONNELL (Mailed 10/31/2005)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Application of Southern California Edison Company (U 338-E) for Authorization: (1) to Replace San Onofre Nuclear Generating Station Unit Nos. 2 & 3 (SONGS 2 & 3) Steam Generators; (2) Establish Ratemaking for Cost Recovery; and (3) Address Other Related Steam Generator Replacement Issues. |
Application 04-02-026 (Filed February 27, 2004) |
Carol A. Schmid-Frazee, John W. Spiegel, Charles D. Siegal, and Martin D. Bern, Attorneys at Law, for Southern California Edison Company, applicant.
Paul Angelopulo, Attorney at Law, and Mark R. Loy, for the Office of Ratepayer Advocates; Matthew Freedman, Attorney at Law, for The Utility Reform Network; James Weil, for the Aglet Consumer Alliance; Alcantar & Kahl, LLP, by Michael Alcantar, Attorney at Law, for the Cogeneration Association of California; Ellison, Schneider & Harris, LLP, by Andrew B. Brown, Attorney at Law, for the Independent Energy Producers Association; Daniel W. Douglass, Attorney at Law, for the Western Power Trading Forum; Adams, Broadwell, Joseph & Cardozo, by Marc Joseph, Attorney at Law, for the Coalition of California Utility Employees; James F. Walsh, Attorney at Law, Amy Peters and Wendy Keilani, for San Diego Gas and Electric Company; Jennifer K. Post, Attorney at Law, for Pacific Gas and Electric Company; James Ross, for Chevron Texaco McKittrick Cogeneration Company; Alcantar & Kahl, LLP , by Nora Sheriff, Attorney at Law, for the Energy Producers and Users Coalition; Karen Tarranova, Attorney at Law, for THUMS Long Beach Company; Brian T. Cragg and Lucina Lea Moses, Attorneys at Law, for City of Anaheim; Ronald Liebert, Attorney at Law, for California Farm Bureau Federation; Sabrina Venskus, Attorney at Law, for California Earth Corps; interested parties.
O P I N I O N
TABLE OF CONTENTS
Title Page
IV. SDG&E Participation in the SGRP 11
V. Need for and Timing of the SGRP 11
VI. SCE's Cost-Effectiveness Model 11
G. Replacement Energy Costs 11
J. Recovery of Capital Costs in the Event of an Early Shutdown 11
N. SDG&E Recommendations Regarding SCE's Acquisition
of SDG&E's Ownership Share 11
VIII. Combustion Engineering Issues 11
IX. Reasonableness Review-SGRP 11
X. Reasonableness Review-Management of the Original Steam Generators 11
XI. Aglet and TURN Proposals for Guaranteed Savings 11
A. Construction Financing Costs 11
B. Removal and Disposal Costs 11
C. Recovery of the Remaining Book Value
of the Original Steam Generators 11
XIII. Cost-Effectiveness Conclusion 11
XVI. Affirmation of ALJ Ruling 11
XVII. Categorization and Need for Hearings 11
XVIII. Comments on Proposed Decision 11
XIX. Assignment of Proceeding 11
ATTACHMENT A
ATTACHMENT B
I. Summary
By this order, we present our findings as to the cost-effectiveness of the steam generator replacement program (SGRP) proposed by Southern California Edison Company (SCE) for San Onofre Nuclear Generating Station Units 2 & 3 (collectively SONGS, separately Unit 2 or Unit 3), and related matters.1 Based on these findings, we approve the SGRP subject to the requirements imposed herein. In addition, we certify the Final Environmental Impact Report (Final EIR) as the Environmental Impact Report (EIR) for the SGRP pursuant to the California Environmental Quality Act (CEQA).
Based on our analysis of the SGRP as discussed herein, we find that:
· The SGRP is marginally cost-effective.
· $680 million ($569 for replacement steam generator installation and $111 million for removal and disposal of the original steam generators) is a reasonable estimate of the total SGRP cost, excluding accumulated Allowance for Funds Used During Construction (AFUDC).2
· We will conduct an after-the-fact reasonableness review of the replacement steam generator installation costs, and the costs of removal and disposal of the original steam generators. The reasonableness review of the removal and disposal costs for the original steam generators may be done in a separate review if removal and disposal is completed a significant amount of time after SONGS resumes commercial operation.
· The maximum allowable SGRP cost (cap) is $680 million ($569 million for replacement steam generator installation and $111 million for removal and disposal of the original steam generators) plus accumulated AFUDC, multiplied by SCE's ownership share. The cap applies to total SGRP costs. To the extent that replacement steam generator installation costs are less than $569 million, more funds may be used for removal and disposal of the original steam generators, and vice versa. However, SCE will not be allowed to recover total SGRP costs in excess of the cap.
· SCE may record in a balancing account the revenue requirement associated with the steam generator replacement for each unit as of the date of operation of each unit.
· SCE may record in a balancing account the revenue requirement associated with the removal and disposal of the original steam generators for each unit as of the date removal and disposal is completed.
· SCE may include the revenue requirement for steam generator replacement for each unit in rates, subject to refund pending the results of the reasonableness review, on January 1 of the year following commercial operation of each unit. Implementation shall be by advice letter.
· SCE may include the revenue requirement for removal and disposal of the original steam generators for each unit in rates, subject to refund pending the results of the reasonableness review, on January 1 of the year following completion of the removal and disposal of the original steam generators for each unit.3 Implementation shall be by advice letter.
· After completion of the SGRP, SCE will be required to file an application for inclusion of the SGRP costs permanently in rates. The reasonableness review of such costs shall be conducted in connection with the application. In the event the removal and disposal of the original steam generators is delayed significantly beyond the commercial operation dates of both units, it may be addressed in a subsequent application.
· SCE is authorized to recover through depreciation a total of 20% ($22.2 million) of the estimated costs of removal and disposal of the original steam generators for both units over 2006-2011.
· In future ratemaking proceedings that determine the revenue requirement associated with SONGS operations and maintenance (O&M) costs and capital additions, the O&M costs and capital additions shall not exceed the amounts shown in Attachment A.
San Diego Gas & Electric Company (SDG&E), a co-owner of SONGS, has elected not to participate in the SGRP. Its participation is not addressed herein, and will be addressed in an application to be filed by SDG&E pursuant to § 851.4
The Commission retains the discretion to determine the appropriate ratemaking treatment, including the possibility of a reasonableness review of costs incurred, if the SGRP is cancelled for any reason.
1 San Onofre Nuclear Generating Station Unit 1 (Unit 1) is shut down and undergoing decommissioning.
2 All dollar figures are in 2004 dollars unless otherwise specified.
3 The calculation of the amount to be included in rates shall recognize the recovery of 20% ($22.2 million) of the costs of removal and disposal of the original steam generators for both units through depreciation over 2006-2011.
4 All section references are to the Public Utilities Code unless otherwise specified.
