June 16, 2014
President Peevey and Commission members,
As the Sierra Club’s San Onofre Task Force Chair, I am here on behalf of the 40,000 members of the Angeles Chapter, many of whom are ratepayers affected by the case before you today. Last year our members sent you almost 3,000 letters on this issue.
I will put the matter briefly: Defective technology shut San Onofre ten years earlier than planned. We can all agree that the best economic outcome for our region would be if the entire cost related to this event is paid by Mitsubishi Heavy Industries, the maker of the defective technology.
However, that outcome is not feasible. At best, Mitsubishi will pay for the direct cost of the flawed system it sold Edison. The remaining issue is who covers the costs of the plant going off-line and then being shut permanently.
America’s free market economy is based on a system of risks and rewards. Regulated utilities are a partial exception to this model. Investors are guaranteed a rate of return and utility users are guaranteed reasonable rates.
San Onofre involves an issue beyond this neat model. What is fair cost sharing when management fails to perform due diligence on unproven new technology that subsequently fails at a direct cost of several hundred million dollars and total non-performance losses in the billions?
In such a case, to hold management harmless on financial compensation and job security, and to exempt shareholders so there is no impact on profits, is to depart from the American free-market economic system of risk and reward, and to put in its place a form of corporate welfare enforced by a government agency.
The only way to completely avoid this outcome is to entirely refund to ratepayers the extra amount collected from them solely because of the shutdown and closure at San Onofre. Anything less than this represents a departure from the free-enterprise model in which management is accountable and investors hold management responsible for errors and omissions.
In conclusion, it is absurd on its face to make ratepayers responsible for costs related to the installation of an unproven and fatally defective new technology caused by supplier failures of design and manufacture, and management failures of due diligence.
Thank you for consideration of these views.