2015 General Rate Case - Generation Volume 1 - SONGS O&M
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Application No.:
Exhibit No.: SCE-02, Vol. 01
Witnesses: J. Huson
(U 338-E)
2015 General Rate Case
Generation
Volume 1 – SONGS O&M
Before the
Public Utilities Commission of the State of California
Rosemead, California
November 2013SUMMARY
Test Year 2015 Base O&M: $97.473 million (Constant 2012 dollars, 100% share).
Forecast includes future year adjustment for staffing reduction and reduction of fixed and variable
non-labor expenses.
Forecast reflects Units 2 & 3 in SAFSTOR configuration.SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents
Section Page Witness
I. NUCLEAR POLICY .........................................................................................1 J. Huson
A. Introduction ............................................................................................1
1. Current Status of the San Onofre Nuclear
Generating Station .....................................................................1
2. Background on SONGS and the Steam Generator
Replacement Project ..................................................................1
3. Detection of the Unit 3 Leak and Outage ..................................2
4. SCE’s Response to the Unit 3 Single Tube Leak
Event and the Unit 2 Wear Conditions ......................................2
B. SONGS Resolution of NRC Concerns ..................................................3
1. Background ................................................................................3
2. SONGS Addressed the NRC’s Concerns ..................................4
C. Accounting For Safety-Related Expenses .............................................5
D. SONGS’ Test Year 2015 Forecast .........................................................7
II. SONGS AND PALO VERDE OVERVIEW.....................................................8
A. Overview of SONGS .............................................................................8
1. Impact of Site Layout and Location...........................................8
a) Site Layout .....................................................................8
b) Site Location ..................................................................9
2. Congested Site ...........................................................................9
3. SONGS Plant Output ...............................................................10
4. SONGS Units 2 & 3 O&M Expense Overview .......................11
5. SONGS Units 2 & 3 Capital Expenditure Overview ...............12
B. Overview of Palo Verde.......................................................................13
-i-SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents (Continued)
Section Page Witness
1. Summary ..................................................................................13
2. Palo Verde O&M .....................................................................13
3. Palo Verde Capital ...................................................................14
III. SONGS BUDGETING PROCESS ..................................................................16
A. SONGS Management...........................................................................16
B. Budget Responsibilities for 2008-2012 Historical Costs .....................18
1. Division Responsibilities .........................................................18
2. Budget and Cost .......................................................................18
C. Budget Development ...........................................................................18
1. Budget Categories ....................................................................18
a) O&M ............................................................................18
b) Capital ..........................................................................18
2. Monthly Budget Process and Budget Revisions ......................18
3. Approval Process .....................................................................19
4. Budget Analysis .......................................................................19
IV. DEVELOPMENT OF SONGS BASE O&M FORECAST.............................20
A. Overview ..............................................................................................20
B. Historical Adjustments.........................................................................21
C. Methodologies......................................................................................21
D. Future Adjustments ..............................................................................22
V. OPERATIONS FUNCTIONAL GROUP AND FERC ACCOUNT
FORECAST .....................................................................................................23
A. Operations Overview ...........................................................................23
-ii-SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents (Continued)
Section Page Witness
B. Analysis of Operations O&M Expense By FERC Account ................24
1. FERC Account 520 ..................................................................24
a) Historical Analysis .......................................................24
(1) Labor ................................................................25
(2) Non-Labor ........................................................25
b) Forecast Test Year 2015 Expenses ..............................26
VI. MAINTENANCE FUNCTIONAL GROUP ...................................................27
A. Maintenance Overview ........................................................................27
B. Analysis Of Maintenance O&M Expense By FERC
Account ................................................................................................27
1. FERC Account 532 ..................................................................27
a) Historical Analysis .......................................................27
(1) Labor ................................................................28
(2) Non-Labor ........................................................28
b) Forecast Test Year 2015 Expenses ..............................29
VII. ENGINEERING FUNCTIONAL GROUP .....................................................30
A. Engineering Overview .........................................................................30
B. Analysis Of Engineering O&M Expense By FERC
Account ................................................................................................31
1. FERC Account 517 ..................................................................31
a) Historical Analysis .......................................................31
(1) Labor ................................................................32
(2) Non-Labor ........................................................32
b) Forecast Test Year 2015 Expenses ..............................32
-iii-SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents (Continued)
Section Page Witness
VIII. RADCHEMICAL CONTROL FUNCTIONAL GROUP ...............................34
A. RadChemical Control Overview ..........................................................34
B. Analysis of RadChemical Control O&M Expenses By
FERC Account .....................................................................................35
1. FERC Account 520 ..................................................................35
a) Historical Analysis .......................................................35
(1) Labor ................................................................36
(2) Non-Labor ........................................................36
b) Forecast Test Year 2015 Expenses ..............................37
IX. NUCLEAR REGULATORY AFFAIRS FUNCTIONAL GROUP ................38
A. Nuclear Regulatory Affairs Overview .................................................38
B. Analysis of Nuclear Regulatory Affairs O&M Expense by
FERC Account .....................................................................................38
1. FERC Account 524 ..................................................................38
a) Historical Analysis .......................................................38
(1) Labor ................................................................39
(2) Non-Labor ........................................................39
X. SECURITY FUNCTIONAL GROUP .............................................................41
A. Security Overview ...............................................................................41
B. Analysis of Security O&M Expense By FERC Account.....................41
1. FERC Account 524 ..................................................................41
a) Historical Analysis .......................................................41
(1) Labor ................................................................42
(2) Non-Labor ........................................................42
-iv-SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents (Continued)
Section Page Witness
b) Forecast Test Year 2015 Expenses ..............................42
XI. NUCLEAR TRAINING FUNCTIONAL GROUP .........................................44
A. Training Overview ...............................................................................44
B. Analysis of Training O&M Expenses by FERC Account ...................44
1. FERC Account 524 ..................................................................44
a) Historical Analysis .......................................................44
(1) Labor ................................................................45
(2) Non-Labor ........................................................45
b) Forecast Test Year 2015 Expenses ..............................46
XII. NUCLEAR SUPPORT FUNCTIONAL GROUP ...........................................47
A. Nuclear Support Overview ..................................................................47
B. Analysis Of Nuclear Support O&M Expenses By FERC
Account ................................................................................................48
1. FERC Account 524 ..................................................................48
a) Historical Analysis .......................................................48
(1) Labor ................................................................49
(2) Non-Labor ........................................................49
b) Forecast Test Year 2015 Expenses ..............................50
XIII. CORPORATE SUPPORT ...............................................................................51
A. Corporate Support Overview ...............................................................51
B. Common O&M Expenses ....................................................................51
C. Forecast Test Year 2015 Common O&M Allocation
Expenses ..............................................................................................52
XIV. PARTICIPANT CREDITS ..............................................................................53
-v-SCE-02: Generation
Volume 1 – SONGS O&M
Table Of Contents (Continued)
Section Page Witness
A. Participant Overview ...........................................................................53
B. Test Year 2015 Participant Share O&M Credits .................................53
C. Summary of Participant Share O&M Credits ......................................53
XV. SUMMARY OF FUNCTIONAL GROUPS AND FERC
ACCOUNTS ....................................................................................................55
-vi-SCE-02: Generation
Volume 1 – SONGS O&M
List Of Figures
Figure Page
Figure II-1 SONGS 2 & 3 Net Capacity Factor 2008-2012 ......................................................................10
Figure II-2 SONGS 2 & 3 Net MWh Generation ......................................................................................11
Figure II-3 SONGS Base O&M Expenses 2008-2015 ..............................................................................12
Figure II-4 SONGS Capital Summary Authorized to Recorded 2012 ......................................................13
Figure II-5 Palo Verde O&M Summary ....................................................................................................14
Figure II-6 Palo Verde Capital Summary ..................................................................................................15
Figure V-7 Operations Functional Group – FERC Account 520 Adjusted Recorded 2008-
2012 and Forecast 2013-2015 ..............................................................................................................25
Figure VI-8 Maintenance Functional Group – FERC Account 532 Adjusted Recorded
2008-2012 And Forecast 2013-2015 ...................................................................................................28
Figure VII-9 Engineering Functional Group – FERC Account 517 Adjusted Recorded
2008-2012 And Forecast 2013-2015 ...................................................................................................32
Figure VIII-10 Radchemical Functional Group – FERC Account 520 Adjusted Recorded
2008-2012 And Forecast 2013-2015 ...................................................................................................36
Figure IX-11 Regulatory Affairs Functional Group – FERC Account 524 Adjusted
Recorded 2008-2012 And Forecast 2013-2015 ...................................................................................39
Figure X-12 Security Functional Group – FERC Account 524 Adjusted Recorded 2008-
2012 And Forecast 2013-2015 .............................................................................................................42
Figure XI-13 Nuclear Training Functional Group – FERC Account 524 Adjusted
Recorded 2008-2012 And Forecast 2013-2015 ...................................................................................45
Figure XII-14 Nuclear Support Functional Group – FERC Account 524 Adjusted
Recorded 2008-2012 And Forecast 2013-2015 ...................................................................................49
-vii-SCE-02: Generation
Volume 1 – SONGS O&M
List Of Tables
Table Page
Table II-1 SONGS 2 & 3 Capital Expenditures 2013-2017 ......................................................................12
Table III-2 SONGS Functional Groups .....................................................................................................17
Table IV-3 FERC Account to Functional Group Pairing ..........................................................................20
Table XIII-4 Test Year Forecast – Corporate Support (Common O&M Expense) ...................................52
Table XIV-5 Participants Forecast By FERC Account .............................................................................54
Table XV-6 Adjusted/Recorded O&M Costs By Functional Group .........................................................55
Table XV-7 Test Year 2015 Base O&M Costs By Functional Group ......................................................55
Table XV-8 Test Year 2015 Base O&M Costs By FERC Account/Functional Group .............................56
-viii-1 I.
2 NUCLEAR POLICY
3 A. Introduction
4 1. Current Status of the San Onofre Nuclear Generating Station
5 On June 7, 2013, SCE announced the permanent retirement of Units 2 & 3 at its San
6 Onofre Nuclear Generating Station (SONGS). Both SONGS units have been shutdown since January
7 2012. Unit 2 was taken out of service January 9, 2012 for a planned routine outage. Unit 3 was safely
8 taken offline January 31, 2012 after station operators detected a small leak in a tube inside a steam
9 generator.
10 2. Background on SONGS and the Steam Generator Replacement Project1
11 SONGS has two nuclear generation units, Units 2 & 3, which are two-loop Pressurized
12 Water Reactors that were manufactured by Combustion Engineering. Each unit was originally built
13 with two steam generators (the “original steam generators” or “OSGs”), also manufactured by
14 Combustion Engineering. Unit 2 began commercial operation in 1983, and Unit 3 began commercial
15 operation in 1984. SONGS is co-owned by SCE and two other entities in the following shares: 78.21%
16 SCE, 20% San Diego Gas & Electric (SDG&E), and 1.79% the City of Riverside. SCE serves as the
17 operating agent for SONGS.
18 SCE began studying the replacement of the Original Steam Generators (OSGs) in both
19 Units 2 & 3 in the early 2000s. Because of tube corrosion and wear in the OSGs, SONGS would likely
20 have had to shutdown prior to the expiration of SONGS’ operating licenses in 2022. In 2004, SCE
21 applied to the Commission for approval of the SONGS steam generator replacement project (SGRP) to
22 replace all four OSGs at SONGS, two in each unit. The Commission granted SCE’s application in 2005,
23 finding that SCE’s estimate of $680 million for the SGRP—$569 million for the replacement steam
24 generators (RSGs) and their installation and $111 million for the removal and disposal of the OSGs—
25 was reasonable.2
1 2012-13 SONGS-related base rates costs will be examined in I.12-10-013 (the “SONGS OII”). In March 2013, SCE
filed its Application for the Inclusion of Steam Generator Replacement Program Costs Permanently in Rates (A.13-03-
005). That Application has been consolidated into the SONGS OII.
2 D. 05-12-040, Ordering Paragraph 3, pp. 108-109 (Dec. 15, 2005). This decision was subsequently modified to remove
from the SGRP cost estimate $9.2 million in costs related to the replacement and refurbishment of SONGS high pressure
turbines. D. 11-05-035, p. 5, Findings of Fact 4 and Conclusions of Law 2 (May 26, 2011).
11 In September 2004, SCE contracted with Mitsubishi Heavy Industries (MHI) to design
2 and fabricate the RSGs in Japan. In April 2008, MHI completed fabrication of the Unit 2 replacement
3 steam generators, which were installed during a refueling outage lasting from September 2009 to April
4 2010. Unit 2 returned to operation on April 18, 2010. In April 2010, MHI completed fabrication of the
5 Unit 3 replacement steam generators, which were installed during a refueling outage lasting from
6 October 2010 to February 2011. Unit 3 returned to operation on February 18, 2011.
7 3. Detection of the Unit 3 Leak and Outage
8 On January 31, 2012, sensors detected a primary-to-secondary reactor coolant leak in one
9 of the Unit 3 RSGs, prompting SCE operators to initiate a controlled rapid shutdown of Unit 3. The unit
10 safely reached cold shutdown condition on February 2, 2012. Nuclear Regulatory Commission (NRC)
11 personnel were present on-site when the leak was detected, and SCE immediately notified them of the
12 shutdown. Inspections of Unit 3 revealed that one tube in the RSG was leaking, and that tube-to-tube
13 wear in the U-bend area had occurred in both of the Unit 3 RSGs.
14 SCE had previously commenced a scheduled refueling outage for Unit 2 on January 10,
15 2012. This outage represented the first Unit 2 outage since the installation of the Unit 2 RSGs. Planned
16 inspections of steam generator tubes found unexpected wear in some tubes in both Unit 2 RSGs. Closer
17 examination showed wear from tube-to-tube contact on tubes in one of the Unit 2 RSGs.
18 4. SCE’s Response to the Unit 3 Single Tube Leak Event and the Unit 2 Wear
19 Conditions
20 Immediately following the detection of the leak in Unit 3, SCE established response
21 teams to determine the condition of the RSGs, the extent and cause of the damage, and potential
22 corrective actions. In addition to examining the RSGs in Unit 3, the teams evaluated the unexpected
23 wear in the Unit 2 RSGs to determine potential corrective actions and to consider whether the conditions
24 that caused the leak in one of Unit 3’s RSGs could occur in Unit 2’s RSGs. SCE’s priority was to
25 determine the causes of the tube wear in both units in order to return the units to service safely.
26 The NRC issued a Confirmatory Action Letter (CAL) to SCE on March 27, 2012,
27 requiring NRC permission to restart Units 2 & 3 and outlining actions that SCE must complete before
28 permission to restart either unit could be sought. On October 3, 2012, SCE submitted its response to the
29 CAL presenting its plan to restart Unit 2, which was pending until recently when SCE announced that it
30 would not be restarting either unit.
21 B. SONGS Resolution of NRC Concerns3
2 In Decision (D.) 12-11-051, the Commission discussed SONGS safety issues, acknowledging the
3 vital importance of this issue. Although SONGS is not generating electricity, SCE must continue to
4 ensure that nuclear material (primarily spent nuclear fuel) at SONGS is maintained safely and securely,
5 and to ensure the radiological safety and security of SONGS in accordance with NRC and other
6 regulations. Accordingly, safety remains the top priority at SONGS.
7 Given the importance of this issue, SCE will describe its efforts to ensure safety at SONGS in
8 response to the NRC’s concerns regarding SONGS safety culture.
9 1. Background
10 The NRC regulates commercial nuclear power plants, such as SONGS, through licensing,
11 inspection, and enforcement of its requirements. In these oversight functions, the NRC does not address
12 cost or efficiency; in fact, responding satisfactorily to NRC concerns can often cause increased costs not
13 only for what might be considered corrective actions, but also as a result of implementing changes and
14 new programs and adding personnel on an ongoing basis.
15 In the 2008 Annual Assessment Letter, dated March 4, 2009, the NRC required SONGS
16 to conduct an independent assessment of the safety culture at the site. An independent safety culture
17 evaluation was completed in September 2009, which confirmed that the safety culture at SONGS was
18 sufficient to support safe plant operations but noted that improvement was warranted in certain areas and
19 work groups. In March 2010, the NRC issued a Chilling Effect Letter to SCE to verify that SCE was
20 taking appropriate actions to ensure SONGS was fostering an environment where employees feel free,
21 and are encouraged, to raise safety concerns. The NRC issued this letter based on information it
22 gathered from inspections, NRC conducted focus group interviews, and the number of allegations it
23 received from onsite sources at SONGS in 2009. In response, SONGS conducted a root cause analysis
24 and developed the Nuclear Safety Culture Recovery Plan to ensure appropriate corrective actions would
25 be in place to foster a work environment where employees feel free, and are encouraged, to raise safety
26 concerns. As a result, over the following two years, SONGS improved the working environment by
27 implementing corrective actions to improve various programs and processes that encouraged employees
28 to raise nuclear safety concerns without fear of retaliation.
3 SCE is including this review of steps taken to rectify observations by the NRC to comply with Ordering Paragraphs 9
and 12 of SCE’s Test Year 2012 General Rate Case Decision, D.12-11-051, pp. 881 & 882.
31 In 2011, SCE commissioned a follow-up independent evaluation of the safety culture at
2 SONGS. The independent evaluation team found that the safety culture at SONGS had significantly
3 improved since 2009 and continued to be sufficient to support safe plant operations, but noted there
4 remained room for further improvement in order for SONGS to achieve and sustain excellent
5 performance. The independent evaluation team also found that overall the station operated safely and
6 reliably from 2009 to May 2011.
7 2. SONGS Addressed the NRC’s Concerns
8 In the first quarter of 2012, the NRC determined the SONGS Safety Conscious Work
9 Environment (SCWE) had improved and was sufficient to support safe plant operations, and that a
10 substantial majority of site working-level personnel believed that the SCWE at SONGS had improved.
11 The NRC, therefore, closed the Chilling Effect Letter. Between 2010 and 2012, SONGS completed
12 more than 2,190 corrective actions to close regulatory issues that had been identified between 2008 and
13 2010.4 These actions ranged from revising processes to training the entire site population on behavior
14 expectations. The actions underwent rigorous review boards to ensure their implementation resulted in
15 sustained and measurable performance improvement. In the first quarter of 2012, the NRC also closed
16 the substantive cross-cutting issues in Human Performance and Problem Identification & Resolution
17 stating that SONGS had demonstrated effective corrective actions addressing the issues. The NRC
18 determined that SONGS operated in a manner that preserved public health and safety and met all
19 cornerstone objectives.
20 In the Annual Assessment Letter, dated March 4, 2013, the NRC concluded that SONGS
21 would return to the Licensee Response Column of the Action Matrix in April 2013. The NRC would
22 continue to monitor SONGS’ performance, but had confidence in SONGS scope of effort and progress
23 in identifying and addressing issues of concern. Because the plant had been offline since January 2012,
24 the NRC determined that some baseline inspection procedures and performance metrics could not be
25 accomplished or utilized. The NRC, however, would continue to conduct baseline inspections in
26 accordance with Inspection Manual Chapter (IMC) 0351, “Implementation of the Reactor Oversight
27 Process at Reactor Facilities in an Extended Shutdown Condition for Reasons Other Than Significant
28 Performance Problems.” The NRC transitioned oversight of Units 2 & 3 to IMC 0351 on September 4,
4 These corrective actions did not necessarily result in quantitative increases in expenses, but rather were indicative of a
changed culture, work environment, and training curriculum changes.
41 2012 due to the extended shutdown of both units caused by unusual steam generator tube degradation in
2 the recently replaced steam generators.
3 C. Accounting For Safety-Related Expenses5
4 Accounting for safety-related6 expenses segregated from other costs, as contemplated in the 2012
5 General Rate Case decision, presents a significant challenge. Virtually every task performed at the plant
6 is designed with a work regimen that ensures the safety of the public and SCE’s employees as the
7 highest priority. The inherent nature of the entire span of the work, the training of employees, the order
8 of tasks, the number of hours they are permitted to work, the equipment worn during the work, the work
9 rules that govern the inspections, testing, maintenance and operations, and the design of hardware and
10 tools, are all based on safety requirements.
11 For example, even though Units 2 & 3 are both off-line and the fuel in the Unit 3 reactor has
12 been removed and placed in the spent fuel pools, the work at the site does not diminish significantly and
13 cannot be segregated into safety-related work and other non-safety related tasks. The role of the
14 operations employees is to monitor plant equipment. In doing so, they survey the plant and visually
15 inspect thousands of pieces of equipment every day. Their duties include checking equipment
16 throughout the plant to ensure that it is operating properly; ensuring that systems are properly aligned for
17 the condition the plant is in (for example, ensuring that the fuel pool cooling systems are operating
18 properly); and realigning systems or removing them from service for maintenance or testing. This is
19 done through a precise tagging system to ensure that workers are protected while working on equipment.
20 Technical specifications approved by the NRC require certain surveillances and testing that must
21 be performed by maintenance personnel regardless of the operational status of the plant, and security of
22 the facility must be maintained at all times, which includes more than securing the perimeter of the plant
23 itself. Even with both units off line, the circulating water system and other plant components must
24 operate to maintain the ability to keep various components in the plant cool and allow for the discharge
5 SCE is including this discussion of safety-related expenses to comply with Ordering Paragraph 9 of SCE’s Test Year
2012 General Rate Case Decision, D.12-11-051, p. 881.
6 In this testimony, SCE does not use the term “safety-related” as defined by the NRC, as that specific NRC term is limited
to identifying those systems, structures, and components, and procedures and processes that are absolutely necessary in
emergency, non-routine conditions to safely shutdown the plant and maintain it in safe shutdown condition. As such, the
term (as defined by the NRC) does not identify the systems, structures, components, and procedures and processes that
are used in normal conditions for that purpose. Accordingly, SCE uses the term more broadly to refer to all systems,
structures, and components; procedures and processes; and personnel needed to perform these activities that are
important to maintain the health and safety of the public, in both normal and emergency conditions.
51 of waste water. The circulating water system is an important safety-related system that provides the
2 ultimate heat sink to keep the nuclear fuel, which is stored in the spent fuel pools, cool. Seawater is
3 used to provide a cooling medium to transfer heat from plant equipment (including the spent fuel pools)
4 to the circulating water system through pumps, piping, and heat exchangers.
5 The circulating water system consists of a large conduit that sits on the ocean floor and draws in
6 seawater to a fore bay with large capacity pumps that pump the water through the generating unit
7 condensers. In addition to the circulating water pumps, there are also smaller pumps that move cold
8 seawater through heat exchangers for cooling the spent fuel pools and other plant components. The
9 maintenance of this system as well cannot be segregated into safety-related and non-safety related
10 portions of work.
11 In addition to the circulating water pumps, the traveling screens, mussel growth mitigation, and
12 debris removal systems must all be operated routinely to prevent fouling of the circulating water
13 systems. Kelp and other marine material is occasionally drawn in with the seawater. Systems like the
14 traveling screens are used to screen this material out to avoid clogging the circulating water system.
15 Plant personnel observe oil levels in rotating equipment, monitor bearing temperatures, and observe
16 operation for proper flows, temperatures, and sounds from running equipment. Failure to maintain these
17 systems properly could lead to unsafe circumstances at the plant.
18 Other equipment in the plant must remain operational and in service even with both units
19 permanently shutdown. This includes plant electrical systems, lubricating oil systems, compressed air
20 systems, water purification systems, plant drainage and sump systems, used fuel storage systems, and
21 plant security systems. All of the components involved in these systems must be routinely checked for
22 proper operation. During equipment breakdowns, repair work is required. Depending on the security
23 sensitivity of the equipment, security personnel may need to monitor work on critical equipment and
24 testing and calibration of components may be needed when equipment is returned to service after
25 maintenance. Safety is not an “adder” or supplemental cost attached to the expense of specific tasks.
26 When every inspection, maintenance, or repair task has safety as a prerequisite, it is simply not possible
27 to quantify the safety component of the specific task or employee work record to determine what
28 percentage of that employee’s day was spent performing work safely and what percentage of work they
29 performed with no safety-related expense.
61 D. SONGS’ Test Year 2015 Forecast
2 On June 7, 2013, SCE announced it would no longer seek to restart Units 2 & 3, and both units
3 have permanently ceased operations and are in the process of being placed in a SAFSTOR
4 configuration.7 SCE formally notified the NRC of this decision on June 12, 2013 by submitting a
5 Certificate of Permanent Cessation of Power Operations.8
6 Despite the permanent shutdown of SONGS, SCE anticipates that most of the functions and
7 Functional Groups that were required to support two operating units will continue to be required, albeit
8 at substantially reduced levels. The recent decision to permanently retire the units has placed SONGS in
9 an unprecedented position regarding future staffing levels. SCE is evaluating the requirements for the
10 functions and Functional Groups that will be required to maintain the units in a SAFSTOR
11 configuration. SCE currently estimates that 400 SONGS employees will be required to maintain
12 SONGS in SAFSTOR throughout the rate case cycle.9 In addition, SCE estimates that 40 contract
13 workers will be required to support the maintenance of Units 2 & 3 in a permanent shutdown
14 configuration.
7 In a SAFSTOR configuration, all plant systems that are not required to directly or indirectly support the safe storage of
the fuel assemblies in the units’ spent fuel pool are drained, de-energized, and abandoned in place until they are
decommissioned.
8 See workpapers entitled “Certificate of Permanent Cessation of Power Operations filed with NRC on June 12, 2013.”
9 In addition, SONGS will still need to utilize the services of 9 support personnel who functionally report to Corporate
Finance & Operational Services, but who still record their expenses to a nuclear FERC account.
71 II.
2 SONGS AND PALO VERDE OVERVIEW
3 The testimony in this volume provides a Test Year 2015 forecast for SONGS Base O&M
4 expenses. This testimony also describes SONGS O&M activities and explains the development of the
5 Test Year 2015 forecasts. Except where SCE’s share of SONGS O&M is identified, this testimony
6 discusses recorded and forecast costs and adjustments at the 100 percent level.
7 Expenditures for Palo Verde O&M and capital are discussed in Exhibit SCE-02, Volume 3.
8 A. Overview of SONGS
9 1. Impact of Site Layout and Location
10 SONGS is located in heavily populated northern San Diego County, California. SONGS
11 sits adjacent to the Pacific Ocean on a compact and congested site that is bisected by a major highway.
12 The effects of the site location and physical layout negatively impact productivity and has historically
13 increased operating costs.
14 a) Site Layout
15 The SONGS site is located just south of the city of San Clemente on land
16 obtained through an easement and general lease obtained from the Department of the Navy. SONGS
17 consists of the plant site and the Mesa facilities. Interstate 5 (I-5) bisects SONGS. The SONGS plant
18 site, which is situated on an easement, is built on the west side of the I-5 freeway between the North and
19 South portions of the San Onofre State Park. The SONGS plant site houses the actual generating
20 facility.
21 The Mesa facilities, which are situated on leased property, are built on the east
22 side of the I-5 freeway. The Mesa facilities house the Emergency Operations Facility, the Training and
23 Education Center, the Central Processing Facility, the SONGS Warehouse, and office facilities for
24 several support organizations, including the Design Engineering organization. The Mesa facility is
25 approximately 3.5 miles from the plant site. Therefore, employees must drive back and forth to deliver
26 material, attend meetings and required training, or perform plant walk downs.
27 The Mesa facilities house major equipment needed to maintain the plant. For
28 example, SCE must transport special reinforced concrete gates, that weigh 80,000 pounds each, from the
29 Mesa facilities and install them in the plant during outages to allow for inspections of the plant intake
30 structure. Since installation, removal, and transportation of these gates requires the use of a 175-ton
31 crane, these activities take additional time and effort unique to SONGS.
81 b) Site Location
2 Because SONGS is located in a heavily populated area, SCE must coordinate
3 emergency response planning and preparation with seven separate decision-making entities, including
4 the cities of San Clemente, San Juan Capistrano, and Dana Point, the counties of San Diego and Orange,
5 the Camp Pendleton Marine Corps Base, and the California Department of Parks and Recreation.
6 Coordination with these entities requires more time and effort than at other nuclear plants.
7 SONGS is adjacent to the Pacific Ocean. Its use of ocean water for cooling
8 requires it to maintain a permanent fish recovery system in each unit’s ocean intake piping. This
9 system, which is unique to SONGS, successfully limits the damage to fish entering the circulating water
10 system. Despite more than 1.6 million gallons of seawater per minute entering the plant via the intake
11 conduits (with both units operating), 80 percent of the fish entering these conduits survive. Of course,
12 these systems require maintenance, and SCE must train operators in their use. The California Regional
13 Water Quality Control Board (CRWQCB) Regulations for counting fish are contained in the CRWQCB
14 National Pollutant Discharge Elimination System (NPDES), Permit Nos. CA0108073 and CA0108181
15 for SONGS Units 2 & 3, respectively, requires SCE to periodically count fish to assess the impact of
16 SONGS on the marine environment. These activities require additional time and effort.
17 2. Congested Site
18 Because the site footprint of SONGS is relatively small, the fixed equipment and
19 structures necessary for its operation are close together. Located in a Zone 4 Seismic environment,10
20 SONGS is designed to withstand the impact of a magnitude seven earthquake five miles offshore.11
21 When SCE analyzes modifications to safety-related structures, systems, and components, SCE designs
22 or tests these modifications to ensure performance of their safety functions during seismic events. The
23 design, analysis, and testing identifies appropriate locations in the system or equipment for mechanical
24 restraints and snubbers. These mechanical restraints and snubbers act like a seat belt by allowing the
25 systems and equipment to move during normal operation in response to thermal expansion, but holding
26 them firmly in place during a seismic event. These mechanical restraints and snubbers make the plant
27 more congested and increase the difficulty of the overall maintenance. Routine maintenance,
28 preparation, and simple housekeeping become more complex due to the seismic requirements.
10 Zone 4 is the highest category of seismic activity based on the Uniform Building Code.
11 Updated Final Safety Analysis Report (UFSAR) Sections 2.5.2.6 and 3.7.
91 Employees must appropriately secure ladders, scaffolding, and portable test equipment. This prevents
2 them from falling and rendering it inoperable during a seismic event. SCE must sometimes perform
3 engineering assessments to comply with plant procedures and NRC regulations when securing ladders,
4 scaffolding or portable test equipment for non-routine maintenance activities and equipment. These
5 requirements add time and effort to maintenance activities.
6 3. SONGS Plant Output
7 From 2008 to 2012 SCE strived to achieve maximum output from SONGS 2 & 3 while
8 maintaining safety as the top priority. Figure II-1 below shows SONGS 2 & 3 Capacity Factor
9 performance from 2008-2012.
Figure II-1
SONGS 2 & 3 Net Capacity Factor 2008-2012
10 In 2012, the SONGS 2 & 3 net capacity factor decreased significantly because both units
11 were offline throughout most of the year. Unit 2 was removed from service on January 9, 2012 for its
12 Cycle 17 RFO, and Unit 3 was removed from service on January 31, 2012 for its Steam Generator
13 Inspection and Repair Outage.
14 Figure II-2 below provides the 2008 through 2012 SONGS 2 & 3 Net MWh Generation.
10Figure II-2
SONGS 2 & 3 Net MWh Generation
1 As described above, the significant decrease in MWh generation during 2012 is a result
2 of the Unit 2 Cycle 17 RFO and the Unit 3 Steam Generator Inspection and Repair outage.
3 4. SONGS Units 2 & 3 O&M Expense Overview
4 SCE estimates Test Year 2015 Base O&M for SONGS Units 2 & 3 at $97.473 million
5 (2012 dollars, 100% level). There are no costs associated with RFOs and Mid-Cycles because both
6 Units are permanently shutdown and will be in SAFSTOR configuration.
7 Figure II-3 reflects SONGS adjusted/recorded Base O&M costs for 2008-2012 and the
8 forecast Base O&M costs for Test Year 2015.
11Figure II-3
SONGS Base O&M Expenses 2008-2015
1 5. SONGS Units 2 & 3 Capital Expenditure Overview
2 Table II-1 sets forth the forecasts of SONGS Units 2 & 3 capital expenditures for years
3 2013-2017.
Table II-1
SONGS 2 & 3 Capital Expenditures 2013-2017
2013 2014 2015 2016 2017 5 Year Total
$ 90,000 $ 27,225 $ 19,949 $ 15,259 $ 24,339 $ 176,771
4 Following the decision to permanently shutdown SONGS, SCE cancelled many capital
5 projects that were no longer needed because the units would not be restarted. SCE retained certain
6 capital projects, however, that continued to be needed to directly or indirectly support the safe storage of
7 nuclear fuel in the SONGS 2 & 3 spent fuel pools.
8 Figure II-4 below shows SONGS’ 2012 GRC Commission-authorized amount for capital
9 expenditures in relation to SONGS’ 2012 recorded capital costs. On a project-by-project basis, the
10 capital expenditures comprising 2012 authorized may not necessarily match the actual capital
121 expenditures recorded in 2012. Overall in 2012, SCE increased its capital spend as a result of the
2 extended Units 2 & 3 outages. Please see Exhibit SCE-02, Volume 2, Generation – SONGS 2 & 3
3 Capital Expenses, for a detailed discussion regarding SONGS’ development of its capital forecast.
Figure II-4
SONGS Capital Summary Authorized to Recorded 201212
4 B. Overview of Palo Verde
5 1. Summary
6 Palo Verde is a three unit nuclear generating facility located in the desert west of
7 Phoenix, Arizona. SCE owns a 15.8 percent share of Palo Verde, for which Arizona Public Service
8 (APS) is the operating agent.13 Palo Verde’s staffing level reflects its unique location, licensing base,
9 design, and NRC regulatory status. SCE exercises its ownership responsibilities at Palo Verde through
10 participation in the Administrative and Engineering and Operations (E&O) committees.
11 2. Palo Verde O&M
12 SCE estimates Test Year 2015 costs for its share of Palo Verde O&M expenses at $73.8
13 million (2012 dollars, SCE share).
12 Excludes Steam Generator Replacement Project expenditures of $10.91 million. Also, in compliance with D.12-11-051
Ordering Paragraph 7, SONGS has provided five years of recorded costs (2008-2012) and 2012 authorized capital spend,
which is included in workpapers for SCE-02, Volume 2. SONGS’ capital forecast for 2013-2015 is included in
testimony of SCE-02, Vol. 2.
13 Palo Verde is owned by the following (ownership percentages indicted in parentheses): Arizona Public Service (29.1%),
Salt River Project (17.49%), El Paso Electric Company (15.8%), SCE (15.8%), Public Service of New Mexico (10.2%),
Los Angeles Department of Water & Power (5.7%), and Southern California Public Power Authority (5.91%).
131 Figure II-5 below shows Palo Verde’s 2012 GRC Commission-authorized amount for
2 O&M in relation to Palo Verde’s 2012 recorded costs. The decrease in costs between 2012 authorized
3 and 2012 recorded is primarily due to improvements made in refueling outage performance and
4 implementation of productivity improvements. Please see Exhibit SCE-02, Volume 3, Generation –
5 Palo Verde O&M Expenses, for a detailed discussion on the Palo Verde O&M forecast.
Figure II-5
Palo Verde O&M Summary
6 3. Palo Verde Capital
7 SCE projects capital expenditures for Palo Verde will total $155.6 million (nominal
8 dollars, SCE share) from 2013 through 2017. Major projects include: (1) Security Access Control
9 System Replacement, (2) Upgrade to the Generrex Generator Excitation System, (3) Spray Pond
10 Concrete Replacement, (4) Water Reclamation Facility modifications, and (5) Fukushima Regulatory
11 Requirements.
12 Figure II-6 below shows Palo Verde’s 2012 GRC Commission-authorized amount for
13 capital expenditures in relation to Palo Verde 2012 recorded. As with SONGS capital expenditures, on a
14 project-by-project basis, the capital expenditures comprising 2012 authorized may not necessarily match
15 the actual capital expenditures recorded in 2009. Please see Exhibit SCE-02, Volume 3, Generation –
16 Palo Verde Capital Expenditures, for a detailed discussion regarding SONGS’ development of its Palo
17 Verde capital forecast.
14Figure II-6
Palo Verde Capital Summary 14
14 In compliance with D.12-11-051 Ordering Paragraph 7, SCE has provided five years of recorded costs (2008-2012) and
2012 authorized capital spend, which is included in workpapers for SCE-02, Volume 3. Palo Verde’s capital forecast for
2013-2015 is included in testimony of SCE-02, Vol. 3.
151 III.
2 SONGS BUDGETING PROCESS
3 A. SONGS Management
4 SCE currently manages SONGS in accordance with eight functional groups,15 shown in Table
5 III-2, that generally reflect the types of work activities performed at SONGS. SCE assigns a Director to
6 each of the divisions identified below. A division may have one or more groups and each group may
7 have several sections.
15 The number of functional groups will most likely change because of the permanent shutdown of SONGS.
16Table III-2
SONGS Functional Groups
Functional Group Division
Operations Operations & Emergency Services
Maintenance Maintenance & Work Control
Design Engineering
Systems Engineering
Engineering Programs
Joint Engineering Team
Engineering Engineering Support
Nuclear Fuel Management
Project Management
Human Performance & Industrial Safety
Nuclear Oversight & Assessment
Radiation Protection
Radchemical Control
Chemistry & Environmental
Regulatory Affairs
Regulatory Affairs
Emergency Planning
Security Security
Training Training
Business and Financial Services
Site Support Services
Nuclear Safety Culture
Nuclear Strategic Projects
Nuclear Support
Performance Improvement
Leadership & Organizational Effectiveness
Incremental O&M Projects
Health Services
Corporate Support NA
Participants NA
1 The Chief Nuclear Officer (CNO), Site Vice President & Station Manager (VP&SM), VP of
2 Engineering, and Plant Manager, along with thirteen Directors, manage the activities of the SONGS
3 divisions.
171 B. Budget Responsibilities for 2008-2012 Historical Costs
2 1. Division Responsibilities
3 Each Director identifies the efforts required to accomplish the work scope in their
4 division’s area of responsibility. The Directors work with their respective Managers and work groups to
5 analyze the costs for the activities and enter them into a budget that is presented to the VPs and CNO for
6 approval. Once approved, SONGS strives to accomplish the work scope within the approved budget
7 unless, or until, the CNO approves any deviations. Adherence to budget does not interfere with safety
8 and regulatory compliance.
9 2. Budget and Cost
10 The cost professionals in the Business and Financial Services (B&FS) group work closely
11 with each division’s management to form an integrated cost team. The cost professionals provide
12 SONGS independent assurance that effective budgeting practices remain in effect. They follow detailed
13 budget development steps and a rigorous approval process. Subsequent tracking provides management
14 oversight of authorized budgets and spending.
15 C. Budget Development
16 1. Budget Categories
17 The SONGS budget consists of two categories: O&M and Capital.
18 a) O&M
19 O&M includes labor and non-labor expenses to place both Units 2 & 3 in a
20 SAFSTOR configuration until decommissioning commences.
21 b) Capital
22 Capital projects include special projects, plant modifications, balance of plant
23 modifications, and department annual programs. SONGS processes capital items through the capital
24 work order system as described in Exhibit SCE-02, Volume 2. Prior to submission into the work order
25 system, the CNO reviews and approves the capital projects.
26 2. Monthly Budget Process and Budget Revisions
27 SCE formally reviews SONGS budget performance each month. The budget
28 development process in the second and third quarters of each year provides an opportunity to review and
29 update the SONGS year-end budget projections. This approach provides a current forecast based on the
30 best information available. The CNO and his direct reports review the budget performance each month.
31 At each of these opportunities, SCE incorporates changes as appropriate.
181 The B&FS group collects and evaluates emergent work as identified by Directors and
2 Division Managers that could significantly impact the SONGS current year budget. The Station
3 Manager and Directors, in conjunction with the affected Division Managers, determine which emergent
4 work is necessary, the appropriate timing, and the effect on current budget performance.
5 3. Approval Process
6 The B&FS group follows a step-by-step process for obtaining approvals on both the
7 monthly budget revisions and the following year’s annual budget submittal to the SCE Corporate
8 Budgeting Department. As part of this process, each division provides a detailed review of its budget.
9 The Directors identify significant changes from one year to the next, review each change, and approve
10 those that are justified. The Directors then proceed to obtain VP approval for their respective divisions.
11 The Capital budget process is described in Exhibit SCE-02, Volume 2. After the Station Manager and
12 Directors review the budgets from their divisions, the budgets are consolidated and reviewed by the
13 CNO. The SCE Corporate Budget Department reviews and approves each year’s budget after approval
14 by SONGS.
15 4. Budget Analysis
16 As monthly and significant events occur throughout the year, Directors, Management,
17 and the B&FS group analyze budget impacts and determine if action is required. If so, they adjust the
18 budget accordingly to address the issue. The B&FS group issues various cost and staffing reports to
19 assist the Directors and Managers in meeting their work completion and budget goals. SONGS analyzes
20 cash flows and projected year-end variances on a monthly basis.
191 IV.
2 DEVELOPMENT OF SONGS BASE O&M FORECAST
3 A. Overview
4 The O&M costs incurred during normal plant operations, including overtime, are Base O&M
5 costs. This chapter describes how SCE develops the forecast for SONGS Base O&M costs. SCE
6 adjusted Base O&M expenses to reflect SCE’s expectation that Units 2 & 3 will be in a SAFSTOR
7 configuration during the 2015-2017 period. Chapters V through XIV provide SCE’s Base O&M cost
8 forecast for each Functional Group for Test Year 2015. Chapter XV summarizes the Base O&M cost
9 forecasts for Functional Groups. This testimony organizes the descriptions of O&M costs that follow
10 this chapter, by the eight Functional Groups and the FERC Uniform System of Accounts. See Table IV-
11 3 for an illustration of the FERC Account pairing to Functional Group.
Table IV-3
FERC Account to Functional Group Pairing
FERC
Functional Group
Account
Engineering
517
Participants
Operations
520 Radchemical Control
Participants
Nuclear Support
Regulatory Affairs
Security
524
Training
Corporate Support
Participants
Maintenance
532
Participants
12 SONGS used recorded Base O&M costs from 2008 through 2012 as the initial basis for
13 estimating Test Year 2015 Base O&M costs. SONGS then removed one-time and cyclical costs, such as
14 RFO costs, from the historical recorded costs to derive recorded/adjusted Base O&M costs. This
15 prevents such costs from inappropriately increasing or decreasing forecast Base O&M costs. SONGS
16 discusses these Historical Adjustments in workpapers.
201 With the Historical Adjustments included, SONGS reviewed several methods to project the
2 recorded/adjusted costs forward to Test Year 2015. SONGS then selected the method that yielded the
3 most reasonable forecast of future work scope requirements for each Functional Group and FERC
4 Account pairing. Section C of this Chapter describes the available methods. SONGS utilized criteria
5 defined in D.89-12-057 to select the most reasonable forecast for each Functional Group and FERC
6 Account Pairing.
7 After projecting the base scope of work costs forward to Test Year 2015, SONGS applied Future
8 Adjustments to each Functional Group and FERC Account pairing, as applicable, to reflect projected
9 scope of work increases or decreases in Test Year 2015. These adjustments to O&M costs reflect the
10 levels estimated to be required to maintain Units 2 & 3 in a SAFSTOR configuration. Future
11 adjustments are discussed in detail in the applicable Functional Groups FERC Account pairings in
12 Chapters V – XV.
13 B. Historical Adjustments16
14 SONGS reviewed the recorded cost for each Functional Group and FERC Account pairing
15 during the 2008 through 2012 period, and evaluated the expenses for cyclical or unusual patterns.
16 SONGS then applied Historical Adjustments to the recorded data to accurately reflect these cyclical or
17 unusual expenses. Historical Adjustments either increase or decrease recorded costs.
18 During the recorded period (2008-2012), SONGS applied Historical Adjustments to “remap”
19 costs into one FERC account per Functional Group to simplify forecasting. The workpapers include a
20 breakdown of where the costs were originally booked and provide detail of how the costs were
21 “remapped” from multiple FERC accounts to one FERC account per Functional Group. SONGS also
22 utilized “remapping” adjustments to transfer historical recorded costs between business units. These
23 “remapping” adjustments had a net zero effect upon historical recorded costs.
24 C. Methodologies
25 SCE evaluated a number of standard methodologies in developing a basis for SONGS Test Year
26 Base O&M forecast for each Functional Group and FERC Account pairing. These methods included:
27 • Two, three, four, and five-year averaging of Recorded/Adjusted O&M costs by FERC
28 Accounts within Functional Groups;
16 See workpapers for Historical Adjustments.
211 • Three, four, and five-year linear trending of Recorded/Adjusted O&M costs by FERC
2 Accounts within Functional Groups;
3 • Last recorded year (2012) using the Recorded/Adjusted O&M costs by FERC Accounts
4 within Functional Groups;
5 • Adjusted methodology for a specific forecast of future costs where SONGS uses one
6 estimating method described above in conjunction with future year adjustments; and
7 • Budget-Based methodology where SONGS develops a specific forecast of future costs
8 without using any of the estimating methods discussed above.
9 D. Future Adjustments17
10 SONGS identified, analyzed, and forecast the cyclical and unusual costs that are anticipated
11 during the 2013 through 2015 period. These forecasts form the basis for Future Adjustments to the Base
12 O&M level at SONGS. SONGS then applied the Future Adjustments to the Base O&M Test Year
13 forecast for the applicable Functional Groups and FERC Account pairing. Future adjustments are
14 discussed in detail in the applicable Functional Groups and FERC Account pairing in Chapters V – XV.
17 See workpapers for Future Year Adjustments.
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