RATEPAYER’ MESSAGE TO SCE & SDG&E ON SAN ONOFRE: YOU BREAK IT, YOU BUY IT!

• The San Onofre Nuclear Power Plant was not “used and useful” at any time after the emergency shutdown on January 31, 2012. Furthermore, as soon as the Root Cause Analysis had been completed by SCE for both Units 2 and 3 on May 7, 2012, it should have been clear to any reasonable manager that the plant would never run again. The U.S. Nuclear Regulatory Commission just published its finding that SCE failed to identify a flawed design for four replacement steam generators, which led to excessive wear to hundreds of tubes that carried radioactive water. http://sanonofresafety.files.wordpress.com/2011/11/ml13263a271-so-inspectionreport2013-09-20.pdf

• CDSO argued in Phase 1 of this CPUC Investigation that SCE did NOT exercise reasonable managerial skill in designing, fabricating, installing and troubleshooting the Steam Generator Replacement Project (SGRP) and related High Pressure Turbine (HPT) project and Phase 3, the Reasonableness Review of the SGRP, remains to be conducted. Therefore, the CPUC has no basis on which to make the findings proposed by SCE and SDG&E in Phases 1 or 2 of the Investigation.

• The calculation of net investment in fixed assets should be based on the plant without the defectively designed and failed SGRP and systems replaced contingent upon it. As a rough estimate, the base plant value, not including these failed/superfluous systems is about $1,241 – $768 [SGRP] – $24 [HPT] = $449 million net investment in the core plant. The difference between $1,241 and $449 represents the loss incurred by the failure of the SGRP and should be resolved between SCE and Mitsubishi Heavy Industries, and any insurance, with the rest covered by shareholders (through loss of their equity).

• Any remaining assets not already been fully depreciated should be depreciated at a rate to allow investors to recover their investment but not enjoy a return on the investment due to the inherent risk involved in such investments. Allowing investors to be risk-free in their investment continues to incentivize monopoly utilities to develop failed projects that run only for a short time, so they can have the entirety of their investment returned plus an ROI and have it returned faster than the normal depreciation schedule. This is extremely counterproductive regulatory policy which has been fully exposed by the magnitude of this failed SGRP and its consequent costs. The CPUC needs no further reason to recognize this and cease repeating this perverse policy.

• San Onofre should be removed from the rate base at the earliest date allowed under Public Utilities Code Section 455.5: November 1, 2012; and all activities subsequent to November 1, 2012, considered “decommissioning” as the plant is no longer used and useful. The defectively-designed and failed Steam Generator Replacement Project and related High Pressure Turbine project should be treated as abandoned plant, and therefore, shareholders should not recover their equity nor any return on their equity investment on them.

The Investor-Owned Utilities who are the gatekeepers to our transmission grid and generation resources do NOT need any more help from this Commission. We ratepayers who fund their lavish compensation and can barely support ourselves, our families, and our small businesses, DO. To wit …

• The Houston Chronicle reported that the average annual compensation of utility executives nationwide increased 150% from 2000 – 2011. In Southern California, it is even more egregious — the annual compensation for the Chair & CEO of SCE increased 15 times from 2000 – 2011, from $764k to 10.9 Mil; and that for the SDG&E Chair/CEO increased a mere 4 times in the same time period, from almost $1 Mil to $3.9 Mil. http://www.chron.com/news/energy/item/Electric-Utility-Executive-Compensation-13532.php?appSession=003978379741089

• The electricity rates paid by the captive customers of the SCE and SDG&E monopolies are 50% higher than those paid in the two largest municipal electric utilities in California (L.A. and Sacramento) http://sanonofresafety.files.wordpress.com/2011/11/compareyourelectricrates2012-04.pdf

• SCE is writing down San Onofre Nuclear Generating Station Units 2 and 3 on its books, and reported a 43% increase in year-to-date core earnings for 2013 over 2012.

• While also writing down its 20% share in San Onofre, SDG&E’s parent, Sempra Energy, reported a profit for 2nd Quarter 2013 that almost quadrupled from last year. 

• Compare the guaranteed return expected by SoCal Edison and SDG&E of 5+ % to the current return on other deposits and investments guaranteed by the government:

• Daily overnight average for the 1-year CD 0.70%
• One-Year Treasury 0.15
• Constant Maturity 91-day T-bill auction avg disc rate. 0.020
• 182-day T-bill auction avg disc rate 0.035
• Two-Year Treasury Constant Maturity 0.47
• Five-Year Treasury Constant Maturity 1.76
• Ten-Year Treasury Constant Maturity 2.92 
• http://www.bankrate.com/rates/

• While our SDG&E and SCE rates go up even higher, the CPUC is currently soliciting bids for a $7 MIL contract to buff its tarnished image for safety and accountability. https://www.bidsync.com/DPX/ca/cdgs?ac=view&auc=1947395
   

(The article above is a press release from the Coalition to Decommission San Onofre (CDSO),  A project of Citizens Oversight, a 501(c) organization; Image Credit: An aerial view of the San Onofre Generating Station – Jelson25, courtesy Wikipedia Commons.)