Case #836.0

Who Should Pay for San Onofre Nuclear Power Plants?

Publication Date: January 01, 1988
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Abstract:
This case, drawn from proceedings of the California Public Utilities Commission, examines the financial implications for a utility of heightened scrutiny of a nuclear power plant project. The CPUC was due to begin hearings in December 1985 on a request by Southern California Edison to have its rate base adjusted to include the costs of constructing the San Onofre Nuclear Generating Station. Normally Edison would be allowed to earn a return on all costs that were found to have been prudently incurred. The commission had filed a recommendation that $829 million be disallowed, because it represented "unreasonable cost" resulting from "avoidable delay." It later revised its position and proposed that the portion of the project's tenfold cost growth that was found not to result from imprudence should be shared equally by ratepayers and stockholders.

Learning Objective:
By placing these events in the context of industry trends in the nuclear era, the case facilitates discussion of a number of questions: Should utilities continue to enjoy the protection of being a regulated industry? Do the cost outcomes of high-risk projects justify a redefinition of the traditional "regulatory compact?" By what standard of management performance should utilities be judged, and what are the consequences for both utilities and consumers of imposing stiff penalties when high costs are the only evidence of mismanagement?

Other Details

Case Author:
Mary Schumacher
Faculty Lead:
Ron Fox
Pages (incl. exhibits):
39
Setting:
United States
Language:
English
Funding Source:
Pew Charitable Trusts