XI. Assignment of Proceeding
Geoffrey F. Brown is the Assigned Commissioner, and Administrative Law Judge (ALJ) Jeffrey P. O'Donnell is the principal hearing officer in this proceeding.
1. SCE owns 80% SONGS 1, and 75.05% of SONGS 2&3.
2. SDG&E owns 20% of SONGS 1, 2 & 3.
3. SCE is a non-operating owner of 15.8% of Palo Verde.
4. APS owns 29.10% of Palo Verde, and is the operating agent.
5. The utilities' estimate for the decommissioning costs of SONGS 2&3 is based on a site-specific review of the decommissioning requirements for SONGS 2&3, and takes into account experience in decommissioning SONGS 1.
6. While there may be improvements in internals segmentation, vessel segmentation, and large component removal activities in the future, what they may be, and the effect on costs is unknown.
7. ORA offers no specific reasons why improvements in internals segmentation, vessel segmentation, and large component removal activities, if they occur, will result in a 10% savings at SONGS 2&3.
8. The utilities' proposed staffing changes for spent fuel wet storage and additional LLRW volume disposal costs are for additional work that will be performed.
9. SCE`s decommissioning cost estimate for Palo Verde is not as detailed or definitive as the updated SONGS 2&3 cost estimate.
10. The SONGS 2&3 and Palo Verde reactor vessels, reactor vessel internals, and large components are of similar design and size.
11. No decommissioning plan has yet been developed for Palo Verde.
12. ORA offers no specific reasons why improvements in decommissioning methods for internals segmentation, vessel segmentation, and large component removal activities will result in a 10% savings in the future at Palo Verde.
13. In D.99-06-007, the Commission approved a settlement establishing a presumption that the utilities' conduct is reasonable in performing SONGS 1 decommissioning work if the scope of the work completed and costs incurred are bounded by the most recently approved SONGS 1 decommissioning cost estimate.
14. SCE completed the SONGS 1 decommissioning work, as of December 31, 2001, for $91 million, which is less than the $96 million estimate approved in D.99-06-007.
15. No party contested the reasonableness of the $91 million in expenditures.
16. The utilities' $531 million estimate of SONGS 1 remaining decommissioning work, based on site-specific detailed planning studies, is unopposed.
17. The utilities' request to access up to 90% of the $531 million estimate from the trusts to pay for the decommissioning work is unopposed.
18. In D.99-06-007, the Commission authorized the utilities to access trust funds to pay for decommissioning work up to 90% of the approved estimate.
19. Granting the utilities' request to access up to 90% of the approved estimate from the trusts to pay for the decommissioning work will avoid finance charges due to delays in trust fund withdrawals to pay for decommissioning work.
20. More than 60% of the remaining SONGS 1 decommissioning work scope is subject to fixed price contracts.
21. The utilities reduced the contingency factor for remaining SONGS 1 decommissioning work to 15%.
22. The utilities have $482 million available in the SCE SONGS 1 decommissioning trust, and $166 million available in the SDG&E SONGS 1 decommissioning trust.
23. The SONGS 1 trust funds include non-qualified trust fund tax benefit values of $132 million (SCE) and $42 million (SDG&E) as of December 31, 2001.
24. Pursuant to the settlement approved in D.99-06-007, the utilities retained the tax benefits associated with deducting decommissioning costs that were reimbursed from the SONGS 1 non-qualified decommissioning trust, rather than immediately returning these tax benefits to ratepayers.
25. The utilities' request to use tax benefits retained in the non-qualified trust fund to continue SONGS 1 decommissioning work is unopposed.
26. If the Commission were to require the tax benefits to be immediately returned to ratepayers, it would have to impose a revenue requirement on them to provide additional funds to the trusts to pay for decommissioning.
27. There would also be additional costs to implement the return of the tax benefits to the ratepayers.
28. Since SONGS 1 is not operational, imposing a revenue requirement on future ratepayers would violate one of the purposes of the trusts, which is to have the ratepayers who receive power from the plant pay for its decommissioning.
29. In D.00-02-046, the Commission adopted an 11% pre-tax return on equities, and a 7% pre-tax return on the fixed income portion of PG&E's trusts.
30. No participant has indicated specifically how differences in decommissioning trust portfolios, and investment committee risk tolerances are incorporated into its rate of return estimates.
31. The three utilities' trusts will have access to the same securities markets, with the same investment opportunities.
32. While there is merit in using long term historical data for estimating rates of return, selection of which data to use can give quite different results.
33. The DRI forcasts, which SDG&E and SCE use in different ways, yield much lower returns than the historical data used by PG&E and ORA.
34. No participant has demonstrated that its estimate of pre-tax returns on equities is better than the other participant's estimates.
35. Since the midpoint of the pre-tax returns on equities recommended by the participants is lower than the 11% pre-tax return on equities adopted in D.00-02-046, a reduction in the pre-tax return on equities is appropriate.
36. A 10.5% pre-tax return on equities is slightly above the midpoint of the range of values estimated by the participants.
37. The current trust fund contribution levels for SCE and SDG&E were adopted in D.99-06-007.
38. No participant has demonstrated that its estimate of pre-tax returns on fixed assets is better than the other participant's estimates.
39. Since the midpoint of the pre-tax returns on fixed assets recommended by the participants is lower than the 7% pre-tax return on fixed assets adopted in D.00-02-046, a reduction in the pre-tax return on fixed assets is appropriate.
40. A 6.0% pre-tax return on fixed assets is slightly above the midpoint of the range of values estimated by the participants.
41. The NRC data shows rapidly increasing LLRW burial costs followed by large, discrete jumps.
42. The utilities did not include a separate contingency factor in their calculation of escalation rates.
43. A 7.5% escalation rate for LLRW burial costs was adopted for PG&E by the Commission in D.00-02-046.
44. PG&E's use of a simple average in calculating escalation rates gives a 20% weighting to all five categories, while the equipment and materials category accounts for 29%, and the "other" category accounts for 6% of actual expenditures.
45. The participants agree that a DRI forecast should be used for escalation rates, except for LLRW burial cost escalation.
46. ORA's DRI forecasts are the most recent in the record.
47. When using DRI forecasts to estimate escalation rates, use of the value for the last forecasted year for subsequent unforecasted years gives additional weight to the last forecasted year.
48. There is no reason that the DRI forecast for the last forecasted year is any better than the forecast for other years.
49. The Commission adopts contingency factors for cost estimates when the work to be done, and the requirements that must be met to do the work, may change substantially over time.
50. The escalation rate is an estimate of the rate of change in the cost of specified work.
51. The Commission routinely adopts forecasts of cost increases, in general rate cases for example, without applying contingency factors.
52. The NRC LLRW burial cost data shows significant jumps, and has no data for some years.
53. ORA has not demonstrated that its recorded LLRW burial cost increases from 1996 to the present provide a better basis for estimation than the NRC data used by the utilities.
54. It is uncertain where the LLRW will be buried, and at what cost.
55. LLRW burial costs are no less certain now than they were when the Commission adopted a 7.5% LLRW burial cost escalation rate for PG&E in D.00-02-046.
56. The midpoint of the range of LLRW burial cost escalation rates recommended by the participants is 7.5%.
57. The utilities acknowledge that LLRW burial costs could increase substantially due to imposition of state fees or taxes upon LLRW imported from other states such as California.
58. The midpoint of the range of estimated LLRW burial costs proposed by the parties is $240 per cubic foot.
59. The utilities have done a more comprehensive analysis of decommissioning costs, especially for SONGS 2&3, than PG&E.
60. The utilities' proposed 21% contingency factor for SONGS 2&3 is unopposed.
61. Palo Verde has not entered into a detailed planning phase for imminent shutdown and decommissioning.
62. SCE's use of its decommissioning experience and knowledge to refine its estimate for Palo Verde, as it has for SONGS 2&3, should lead to some reduction in uncertainty and, therefore, some reduction in the contingency factor below the 40% proposed by SCE.
63. There is not necessarily a direct relationship between an increase in the decommissioning cost estimate, and a reduction in the contingency factor.
64. The fact that SONGS 2&3 are estimated to begin decommissioning in 2022, and Palo Verde is estimated to begin decommissioning in 2024-2027, suggests the use of a contingency factor for Palo Verde of less than 40%.
65. Use of the 21% contingency factor used for SONGS 2&3 would be inappropriate for Palo Verde.
1. Pursuant to D.99-06-007, the SONGS 1 $91 million decommissioning work completed as of December 31, 2001 is reasonable.
2. The Commission should adopt the utilities' $531 million estimate for SONGS 1 remaining decommissioning work, and authorize them to access up to 90% of the estimate from the trusts to pay for the decommissioning work.
3. Since the utilities' request for authority to use tax benefits retained in the non-qualified trust fund to continue SONGS 1 decommissioning work was approved by D.99-06-007, and is unopposed, it should be approved.
4. SCE, SDG&E, and PG&E's realized rates of return for their trusts will be different.
5. The Commission should adopt a uniform set of rate of return projections for all three utilities.
6. D.99-06-007 approved a settlement and, therefore, is not a precedent.
7. The Commission should adopt a 10.5% pre-tax return on equities.
8. The Commission should adopt 6.0% pre-tax return on fixed assets.
9. Although forecasts of escalation rates are speculative by nature, it makes sense to use the most recent available forecasts.
10. The Commission should adopt the DRI forecasts used by ORA, which are the most recent DRI forecasts in the record, for use in determining escalation rates.
11. When using DRI forecasts for estimating escalation rates, the average rate for the forecast period should be used for the subsequent unforecasted years.
12. The Commission should not adopt a separate contingency factor for escalation rates.
13. The NRC LLRW burial cost data does not provide a good basis for estimating LLRW burial cost escalation rates.
14. The Commission should adopt a 7.5% escalation rate for LLRW burial costs.
15. Future LLRW burial costs are uncertain at best.
16. PG&E's estimate of LLRW burial costs is no better than the estimates prepared by the utilities.
17. Actual LLRW burial costs will lie within the range of estimates proposed by the participants.
18. The Commission should adopt LLRW burial costs of $200 per cubic foot.
19. The Commission should adopt the utilities' proposed 21% contingency factor for SONGS 2&3.
20. The Commission should adopt a 35% contingency factor for Palo Verde.
21. SCE should be authorized a revenue requirement of $32.848 million.
22. SDG&E should be authorized a revenue requirement of $6.692 million.
23. This decision should be effective immediately so that the revenue requirements adopted herein can be put into effect as soon as possible.
24. D.00-06-034 requires that decommissioning costs be allocated on an equal cents per kilowatt-hour basis.
25. The revenue requirements adopted herein should be implemented on an equal cents per kilowatt-hour basis.
IT IS ORDERED that:
1. The following annual revenue requirements are adopted for Southern California Edison Company (SCE) for 2003-2005; $21.160 million for decommissioning of San Onofre Nuclear Generating Station Units 2 and 3 (SONGS 2&3), and $11.688 million for decommissioning of Palo Verde Nuclear Generating Station Units 1, 2, and 3.
2. The revenue requirement adopted for San Diego Gas and Electric Company (SDG&E) for 2003-2005 is $6.692 million for decommissioning of SONGS 2&3.
3. No revenue requirement is authorized for San Onofre Nuclear Generating Station Unit 1.
4. The revenue requirements adopted herein shall be put into rates on an equal cents per kilowatt-hour basis as required by Decision (D.) 00-06-034.
5. SCE and SDG&E shall file advice letters implementing the revenue requirements adopted herein no later than 30 days after the effective date of this decision.
6. Pursuant to D.99-06-007, the SONGS 1 $91 million decommissioning work completed as of December 31, 2001 is reasonable.
7. The utilities' $531 million estimate for SONGS 1 remaining decommissioning work is adopted.
8. The utilities are authorized to access up to 90% of the $531 million estimate from the trusts to pay for SONGS 1 remaining decommissioning work.
9. SCE and SDG&E's request for authority to use tax benefits retained in the non-qualified trust funds to continue SONGS 1 decommissioning work is approved.
10. This proceeding is closed.
This order is effective today.
Dated October 2, 2003, at San Francisco, California.
MICHAEL R. PEEVEY
President
GEOFFREY F. BROWN
SUSAN P. KENNEDY
Commissioners
I dissent.
/s/ CARL W. WOOD
Commissioner
I reserve the right to file a dissent.
/s/ LORETTA M. LYNCH
Commissioner
ATTACHMENT A
SCHEDULE OF RULING AMOUNTS TABLES
SOUTHERN CALIFORNIA EDISON COMPANY
ATTACHMENT B
SCHEDULE OF RULING AMOUNTS TABLES
SAN DIEGO GAS & ELECTRIC COMPANY
