SDG&E Opts to Invest in San Onofre's Plant Repair

Apr 18 - The San Diego Union-Tribune

San Diego Gas & Electric has reversed course and opted to invest $142 million to replace aging equipment at the San Onofre Nuclear Generating Station.

The utility's investment represents 20 percent of the $680 million that will be required to replace steam generators at the seaside electric generating facility.

SDG&E has a 20 percent ownership stake in the plant and receives a comparable share of its output, or about 430 megawatts. A megawatt is sufficient to power about 1,000 typical homes.

SDG&E had earlier hoped to avoid the investment and instead enter into an agreement to simply purchase power from the plant, which is operated by Southern California Edison, the facility's majority owner.

The local utility had hoped to retain at least part of its stake in the nuclear power plant. But an arbitrator ruled that if SDG&E failed to invest in the new equipment, it would forfeit its entire stake.

Another option -- building a new power plant -- was also considered and rejected.

"SDG&E concluded that retaining its share of San Onofre as a resource for its customers is preferable to the alternative of building a new gas-fired power plant," said Peter Hidalgo, an SDG&E spokesman.

He added that the utility also believes that ownership in San Onofre would help limit its vulnerability to high prices of natural gas, which is used to produce the bulk of the electricity SDG&E provides to 3.3 million people.

With its decision to participate in replacing the steam generators, SDG&E will retain its 20 percent interest in the facility.

SDG&E filed its plan to invest in San Onofre late last week with the Public Utilities Commission, whose approval is required before SDG&E can raise and allocate the funds. As part of its application to the PUC, the utility is also asking regulators to approve an increase from 10.7 percent to 11.6 percent in its return on investment in San Onofre, a level equivalent to that received by Edison.

SDG&E's ratepayers, meanwhile, will pay the cost of replacing the generators, which had been expected to last until 2022, or the planned 40-year life of the plant. While the investment in new equipment will start in 2007, SDG&E estimates that the bulk of the money would be spent from 2009 through 2011.

Michael Shames, executive director of the Utility Consumers' Action Network, said the ratepayer battle was lost earlier, when the PUC approved Edison's plan to spend $680 million to replace the steam generators, an amount he believes is excessive.

But once that decision was made, Shames said there appeared to be no alternative but for SDG&E to go along and maintain its interest in San Onofre.

Shames added that he's increasingly pessimistic SDG&E will secure a significant quantity of renewably generated electricity from a proposed solar project in Imperial County, creating additional incentive to keep all current sources of electricity.

Given the region's power needs, he said, "Maybe SDG&E is right in this case."

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