UPDATE 4-California's San Onofre nuclear plant to close for good

Fri Jun 7, 2013 2:53pm EDT

By Scott DiSavino
    June 7 (Reuters) - The crippled San Onofre nuclear plant
will be retired, its operator said on Friday, leaving California
scrambling to keep the state's lights and air-conditioners on
this summer even as it pursues ambitious plans to reduce
greenhouse gas emissions.
    Southern California Edison, owned by Edison International
, said it would retire both nuclear reactors at the plant
in the face of onerous maintenance bills and an industry-wide
shift toward burning more cheap natural gas to feed the grid. 
    The San Onofre units have been shut down safely since
January 2012 after a small radioactive leak was discovered in
tubes inside a steam generator, which was manufactured by
Japanese engineering firm Mitsubishi Heavy Industries.
    Reliability regulators say California already faces
"operational challenges" from the shutdowns and that a prolonged
heatwave could lead to rolling blackouts in the San Diego and
Los Angeles areas. 
    SCE President Ron Litzinger said retirement of the units
would eliminate uncertainty and help with the state's energy
planning. But he warned that "outages, soaring temperatures or
wildfires impacting transmission lines would test the system."
    Governor Jerry Brown said the state was working on a
long-term reliability plan. "As we move into the hot summer
months, we can all do our part by continuing to conserve," he
added. 
    The closure of San Onofre, located near the ocean 60 miles
(96 km) southeast of Los Angeles, would leave the Diablo Canyon
plant on the Central Coast as California's only nuclear plant.
    While always controversial in an environmentally conscious
state, the reactors provide a reliable backbone for the grid as
California strives to meet an ambitious mandate of 33 percent
renewable energy by 2020.
    But high-profile lawmakers only added to lingering concerns
about nuclear power when they said in February that a Mitsubishi
document showed that SCE and Mitsubishi had rejected safety
modifications on the steam generators. 
    Officials at California's electric grid operator said they
believe they will be able to meet power demand this summer
without San Onofre, but they may call for conservation from the
public and firms to ensure blackouts are not required.
    The two San Onofre units increase the number of U.S.
reactors retiring in 2013 to four. FACTBOX 
    "It looks like more and more with an abundant supply of
cheap gas it is easier to walk away from a nuclear plant then to
fix it," said Phil Flynn, senior analyst with the Price Futures
Group in Chicago. "This is a trend that I think will continue." 
    The other two reactors already shut this year are Dominion
Resources Inc's Kewaunee in Wisconsin, due primarily to
economics, and Duke Energy Corp's Crystal River in
Florida, due mainly to the uncertain cost of major repairs.
    The San Onofre reactors entered service in 1983 and 1984,
according to federal data. Three years ago, SCE replaced two
steam generators in the 1,070-megawatt (MW) Unit 2 and then two
more in 1,080-MW Unit 3, before one of them developed the leak.
    
    SECOND QUARTER CHARGES
    In connection with the plant shutdown, SCE will record a
second-quarter charge of $450 million to $650 million before
taxes, or $300 million to $425 million after tax. But the end of
the uncertainty helped Edison shares rise 1.8 percent to $47.20,
compared with a largely unchanged S&P utilities index.
    SCE will also pursue damages from Mitsubishi Heavy and seek
some recovery from insurance. The company runs San Onofre for
its owners, including SCE with 78 percent, Sempra Energy's
 San Diego Gas and Electric (SDG&E) with 20 percent, and
the city of Riverside, California, which has a small stake.
    It was less than a year ago that SDG&E completed the $1.9
billion Sunrise Powerlink line connecting its grid with various
wind and solar projects in the inland Imperial Valley. 
    "With the Sunrise Powerlink now in service and with
additional contracted resources, barring any unforeseen system
emergency, our region should have adequate power supplies for
this summer," said Jessie Knight, SDG&E's chief executive.
    Mitsubishi said it was disappointed by SCE's move and that
it was confident San Onofre could operate safely and reliably.
"We understand, however, the complex and challenging factors
which may have driven this decision," it said in a statement. 
    The U.S. Nuclear Regulatory Commission (NRC) has reviewed
SCE plans to restart Unit 2 for eight months, and several public
meetings were held. SCE said in April that if a restart was not
approved by summer, it may retire the plant. 
    An adjudicatory NRC arm, the Atomic Safety and Licensing
Board (ASLB), then decided last month that more public hearings
were necessary. SCE said that could result in a
delay of more than a year, while it had to bear the costs of
both replacement power and keeping the plant ready to restart.
    "That double cost ends up eroding the cost advantage (of the
nuclear plant) over time," said Ted Craver, head of Edison
International, who felt the uncertainty over San Onofre was not
good for its customers or its investors.
    SCE said with the closure, it will reduce staff at San
Onofre over the next year from 1,500 to about 400, with the
majority of the cuts expected in 2013. Full retirement of the
units prior to decommissioning will take many years, SCE said.