nuclear-news

San Onofre nuclear decommissioning funds may go into risky investments

CHANGES EYED FOR NUCLEAR-PLANT MONEY, UT San Diego 10 Sept 12 Rules on investment of decommissioning trust funds may be loosened. Utility regulators are considering loosening strict investment restrictions on money set aside for the eventual dismantling of California’s two nuclear plants.

The investments review is an unusual addition to the routine
examination of trust balances and contributions conducted every three
years by the California Public Utilities Commission.

Unprecedented equipment failures at the idled San Onofre nuclear plant
have raised the prospect that its multibillion-dollar decommissioning
trusts may need to be tapped sooner than anticipated.

Yet owners of the plant — San Diego Gas & Electric and Southern
California Edison — say they would still take advantage of changes
that could include investments in derivatives, high-yield bonds and
hedge funds.

The San Onofre and Diablo Canyon plants, like most U.S. nuclear
facilities, accumulate decommissioning funds over their operating life
to cope with the decades-long process of removing reactors and
reducing residual radioactivity under federal oversight……
Relicensing could extend by 20 years the life of California’s nuclear
plants — along with the investment horizon for decommissioning funds.
A recent federal court ruling, however, has placed a priority on
finding a solution to the on-site stockpiling of nuclear waste at
plants across the country, including San Onofre.

Truman Burns, a supervisor at the utilities commission’s Division of
Ratepayer Advocates, said the nuclear trusts would take on more risk
to chase higher returns by shifting funds to lower-grade debt, hedge
funds and other instruments that are currently off limits.

Current investments are a combination of mostly domestic stocks and
investment-grade bonds.

“If you look at the utilities’ briefings, they admit that as you get
closer to when you decommission, you want your investments in safer
places like debt and corporate bonds,” Burns said. “You don’t want to
have your trust’s corpus severely damaged just because the market
tanks.”
Changes under consideration would allow investments for the first time
in bonds that are rated below investment-grade, real estate, hedge
funds and commodities, while raising limits on international equities.
Limitations on investment management fees would be relaxed or
eliminated.

Focus questioned

Matthew Freedman, staff attorney at The Utility Reform Network
consumer advocacy group, said that with trusts at healthy levels, the
commission should be focused on how much customers continue to pay for
the operation and upkeep of the idled San Onofre plant.

Those costs dwarf any potential savings from shifting investments, he said.

Edison alone bills its customers about $650 million a year to maintain
and operate San Onofre. The utilities commission recently delayed
consideration of suspending that rate base, possibly until November.

“What is really bizarre is that he (Simon) is discussing concerns
about whether the (San Onofre) units are going to close down
prematurely,” Freedman said. “And the solution may be for you to
invest in riskier investments?”…..
http://www.utsandiego.com/news/2012/sep/09/tp-changes-eyed-for-nuclear-plant-money/

September 12, 2012 - Posted by Christina Macpherson | business and costs, USA