PUC Panel Suggests Closing San Onofre Nuclear Plant : Power: Agency will begin hearings next month. Edison calls cost analysis flawed.

SAN DIEGO â€”  The fate of California’s oldest nuclear power plant will hang in the balance at hearings beginning next month as the Public Utilities Commission discusses a staff recommendation that the San Onofre plant be closed by 1998 on grounds that it is too expensive to operate.

The recommendation to close San Onofre, if accepted by Southern California Edison, the operator and majority owner of the plant, would have a major impact on the region’s economy.

Edison, however, says the recommendation by the PUC’s division of ratepayer advocates is based on a misunderstanding about whether the power generated by the nuclear plant could be easily replaced by other sources.

The sprawling plant, located on the coast between Oceanside and San Clemente, employs 3,000 workers, contributes $200 million a year to the Southern California economy, and pays $25 million in property taxes.

The plant’s two remaining reactors, Units II and III, were designed after the Three Mile Island nuclear accident in Pennsylvania and went into operation in 1983 and 1984. Among the nation’s 109 nuclear plants, San Onofre has been considered a showpiece and received numerous awards.

The Public Utilities Commission does not have the authority to order Units II and III at the San Onofre plant closed down as the staff report suggests. But it could, as it did with Unit I, force closure on Edison by refusing to allow the company to pass the cost of upkeep on to consumers.

Robert Kinosian, an analyst with the Public Utilities Commission and principal author of the report, said the utility could save $50 million a year by shutting San Onofre’s two remaining units and replacing their output with cheaper power from alternative sources, as well as increasing conservation efforts and boosting output from Edison’s other plants.

“The utility has not demonstrated that it is reasonable to pass on the cost of running the nuclear plant to ratepayers,� Kinosian said.

But Joe Wambold, manager of business and financial services for Edison’s nuclear division, said Edison disagrees with Kinosian’s analysis of how the power from San Onofre could be replaced. San Onofre supplies about 20% of the power used by consumers in Southern California, enough to serve 1.3 million households.

“We very much disagree with the conclusion (of the ratepayer advocates),� Wambold said. “There is a fundamental flaw in their analysis.�

A similar recommendation by Kinosian in the late 1980s that Edison close Unit I at San Onofre was also met by opposition from the company. Later the company capitulated, and it closed Unit I in 1992.

Wambold said the issues are different this time. With Unit I, he said, the dispute was about the cost of putting it back into service and about how reliable it would be once it was repaired.

The dispute over closing Units II and III--the huge concrete domes visible from Interstate 5--is fundamentally different, involving a disagreement about whether the power can be replaced, Wambold said.

By Edison’s numbers, keeping San Onofre open provides a minimum $41-million-a-year boon to consumers. If a price tag were put on the increased air pollution that would occur if Edison switched from pollution-free nuclear power, the saving would be even greater, Wambold said.

The difference between Kinosian’s numbers and projections and Edison’s will be examined at hearings to be held by the commission starting next month and expected to last into the summer. The hearings, at the commission’s San Francisco headquarters, are to consider a rate increase request by Edison.

Michael Shames, executive director of the San Diego-based Utility Consumers Action Network, said he is not surprised at the recommendation of the PUC ratepayer advocate staff.

“They are the house provocateurs,� Shames said. “They’re supposed to put out ideas that might be controversial.�

Shutting Units II and III has been discussed by utility watchers for some time, Shames said. “Units II and III at San Onofre have been (economically) marginal at best,� he said.

Kinosian said he came to the conclusion that it makes economic sense to close Units II and III after reviewing recent contracts Edison has signed, or is in the process of signing, with co-generation plants and small power companies that use wind, solar, natural gas and even agricultural waste products.

He said he used 1998 as a cutoff point because he had comparative figures starting in that year. The annual savings would probably increase as San Onofre aged and required additional maintenance, he said.

San Onofre is licensed by the federal Nuclear Regulatory Commission to operate through 2013. In a recent discussion with reporters, Edison Vice President Dick Rosenblum, who is in charge of Edison’s nuclear power division, said the company might consider asking the commission for an extension.

The closure recommendation comes amid concern in the financial community about Edison, including several negative reports by major analysts. The Morgan-Stanley investment house late last year said Edison is the most poorly positioned of any big utility to weather the new world of deregulation and competition.

The state’s other nuclear power plant, the Pacific Gas & Electric facility at Diablo Canyon, began operation in 1985 and 1986.