$400 million insurance settlement for San Onofre outages

23 October 2015

The owners of the San Onofre Nuclear Generating Station in the USA have reached a $400 million settlement with Nuclear Electric Insurance Limited for outages caused by the failures of replacement steam generators. Pedro Pizarro, president of Southern California Edison (SCE), majority owner of the San Onofre plant, said yesterday that the settlement appropriately resolves the plant owners' claims.

SONGS aerial - 460 (SCE)
San Onofre (Image: SCE)

Replacement steam generators supplied by Japan's Mitsubishi - intended to enable San Onofre units 2 and 3 to continue operating until 2022 - were found to be suffering from excessive wear after less than one year in service. Both pressurized water reactors were taken offline in early 2012 only to be closed permanently in June 2013 when SCE decided not to continue a protracted regulatory process to show that lower power operation would be safe.

In yesterday's statement, Pizarro said that 95% of the net insurance proceeds will benefit customers, based on the following allocations for each of the owners: SCE, $312.8 million; San Diego Gas & Electric (SDG&E), $80 million; and the city of Riverside, $7.16 million.

Pizarro added that he expects SCE customers will begin to see the direct benefit of this settlement in early 2016 through reduced rates.

SCE said it continues to seek additional remedies on behalf of customers for the "defective" steam generators supplied by Mitsubishi Heavy Industries (MHI). Through the International Chamber of Commerce, SCE said it is "actively pursuing" arbitration claims against MHI and Mitsubishi Nuclear Energy Systems for the steam generators Mitsubishi designed and built for the San Onofre plant.

SCE said the failure of the steam generators led to the permanent shutdown of the plant and "caused substantial financial and other harm".

SCE and Edison Material Supply LLC filed a demand in October 2013 for arbitration against MHI and its US subsidiary Mitsubishi Nuclear Energy Systems related to the supply of the replacement steam generators. In the arbitration, SCE and co-owners in the San Onofre plant claimed an amount of not less than $4 billion in compensation for damages against Mitsubishi alleging a breach of the warranty obligation of the supply contract.

On 27 July, the claimants submitted documents to the International Chamber of Commerce that increased their claim to $7.57 billion.

Mitsubishi said on 28 July that its liability to SCE is limited "by the contractual provisions to which the parties agreed", which includes an overall limitation of liability of some $137 million as well as "a preclusion of consequential damages, including the cost of replacement power". The company maintains it has fulfilled its obligations under the contract.

San Onofre is owned 78.2% by SCE, 20% by SDG&E and 1.8% by the city of Riverside.

Researched and written
by World Nuclear News