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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE
STATE OF CALIFORNIA
ADMINISTRATIVE LAW JUDGE MARIBETH A. BUSHEY, presiding
Joint Application of SouthernCalifornia Edison Company (U338E)and San Diego Gas & Electric Company(U902E) to Find the 2014 SONGS Units2 and 3 Decommissioning CostEstimate Reasonable and AddressOther Related DecommissioningIssues.
))))))))))))
EVIDENTIARYHEARING
Application14-12-007
REPORTER'S TRANSCRIPTSan Francisco, California
August 27, 2015Pages 352 - 533
Volume - 3
Reported by: Thomas C. Brenneman, CSR No. 9554Wendy M. Pun, CSR No. 12891
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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I N D E X
WITNESSES: PAGE
ADAM H. LEVINDirect Examination By Ms
Salustro357
Cross-Examination By Mr.Freedman
359
Cross-Examination By Ms. Gilmore 368Cross-Examination By Mr. Geesman 380Cross-Examination (Resumed.) By
Ms. Gilmore386
Cross-Examination By Mr. Lutz 394Cross-Examination (Resumed) By
Ms. Gilmore397
Redirect Examination By Ms.Salustro
400
Recross-Examination By Mr.Geesman
403
Examination By ALJ Bushey 404Recross-Examination By Mr.
Geesman405
Recross-Examination By Ms.Gilmore
406
Recross-Examination By Mr. Lutz 407
TRACY M. DALUDirect Examination By Ms.
Salustro408
Cross-Examination By Mr.Freedman
410
Examination By ALJ Bushey 417
NORMA G. JASSODirect Examination By Ms.
Salustro421
Cross-Examination By Mr. Lee 423
RANDALL G. ROSEDirect Examination By Ms.
Salustro432
Cross-Examination By Mr.Freedman
434
BRUCE A. LACYDirect Examination By Mr.
Freedman458
Cross-Examination By Mr.Matthews
461
Cross-Examination By Ms.Salustro
478
Cross-Examination By Mr. Geesman 488Redirect Examination By Mr. 496
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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FreedmanRecross-Examination By Ms.
Salustro500
Exhibits: Iden. Evid.
18 355 45519 356 45520 356 45521 356 45522 356 45623 357 45624 357 45625 365 45626 410 45627 434 45628 434 45629 456 45730 457 45731 458 50432 462 50433 463 50434 502 50335 502 50336 502 50337 503 50338 505 50539 524 52540 525
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
355
SAN FRANCISCO, CALIFORNIA
AUGUST 27, 2015 - 9:00 A.M.
* * * * *
ADMINISTRATIVE LAW JUDGE BUSHEY: The
Commission will come to order.
This is the time and place set for
the continued evidentiary hearing in
Application 14-12-007.
Good morning. Today we are going to
have cross-examination of San Diego Gas and
Electric Company's witnesses. While we were
off the record we identified all of their
exhibits. The titles of these exhibits have
been slightly modified. I will read to you
the official title that we're going to use
and also tell you what has been excised from
the title.
Exhibit 18 is titled Prepared Direct
Testimony in Support of the 2014
Decommissioning Cost Estimates on Behalf of
San Diego Gas and Electric Company. We have
removed from the title the words "second
errata to revised."
(Exhibit No. 18 was marked foridentification.)
ALJ BUSHEY: Exhibit 19 is titled
Rebuttal Testimony in Support of the 2014
Decommissioning Cost Estimates on Behalf of
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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San Diego Gas and Electric Company. We have
removed from that title "errata to prepared."
(Exhibit No. 19 was marked foridentification.)
ALJ BUSHEY: Exhibit 20 is Rebuttal
Testimony, Trust Funds, Regulatory Balancing
and Memorandum Accounts, and Ratemaking on
Behalf of San Diego Gas and Electric Company.
We removed from that title "errata to
prepared."
(Exhibit No. 20 was marked foridentification.)
ALJ BUSHEY: Exhibit 21 is Prepared
Direct Testimony Financial Modeling, Trust
Fund Contributions and Ratemaking on Behalf
of San Diego Gas and Electric Company. We
removed from that title "second errata to
revised."
(Exhibit No. 21 was marked foridentification.)
ALJ BUSHEY: Exhibit 22 is entitled
Supplemental Direct Testimony of Jonathan
Atun, SONGS 2 and 3 Updated Equity Scale Down
and Trust Allocations on Behalf of San Diego
Gas and Electric Company. We added the word
"direct" to that title.
(Exhibit No. 22 was marked foridentification.)
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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ALJ BUSHEY: Exhibit 23 is San Diego
Gas and Electric Company Workpapers for
Witness De Marco.
(Exhibit No. 23 was marked foridentification.)
ALJ BUSHEY: Exhibit 24 are Workpapers
for Witness Atun.
(Exhibit No. 24 was marked foridentification.)
ALJ BUSHEY: Anything further?
Hearing none then, Ms. Salustro,
would you like to call your first witness.
MS. SALUSTRO: Yes. Thank you, your
Honor.
SDG&E calls Adam Levin.
ADAM H. LEVIN, called as a witnessby San Diego Gas and Electric Company,having been sworn, testified asfollows:
ALJ BUSHEY: Please be seated. State
your full name for the record and spell your
last name.
THE WITNESS: My name is Adam H. Levin.
Last named is spelled L-e-v-i-n.
ALJ BUSHEY: Ms. Salustro.
MS. SALUSTRO: Thank you.
DIRECT EXAMINATION
BY MS SALUSTRO:
Q Good morning, Mr. Levin. Mr.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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Levin, a moment ago the judge identified
several exhibits, specifically Exhibit 18,
Exhibit 19, and Exhibit 20. Do you have
those documents in front of you?
A Yes, I do.
Q You're sponsoring sections as
indicated in the table of contents within
each of these three exhibits, correct?
A That is correct.
Q And was this testimony prepared by
you and under your supervision?
A Yes, it was.
Q Do you have any additional changes
or corrections to make at this time?
A I do not.
Q To the extent that these documents
contain facts, are those facts true and
correct to the best of your information,
knowledge, and belief?
A Yes, they are.
Q And to the extent these documents
contain opinions, do those opinions
constitute your best professional judgment?
A Yes, they do.
Q Do you adopt these exhibits as your
sworn testimony in this proceeding?
A Yes, I do.
MS. SALUSTRO: Your Honor, the witness
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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is available for cross-examination.
ALJ BUSHEY: Thank you. Let's start
with Mr. Freedman.
CROSS-EXAMINATION
BY MR. FREEDMAN:
Q Good morning, Mr. Levin.
A Good morning, Mr. Freedman.
Q Mr. Levin, I'd like to ask you to
take a look at your rebuttal testimony,
Exhibit 20, page 12.
A I'm sorry. Exhibit number?
Q 20.
A 20. Yes.
Q And on this page you discuss the
NRC Nuclear Regulatory Commission oversight
of the decommissioning trust funds, and you
state that the NRC oversight prohibits any
return of trust funds until final
decommissioning has been completed; is that
correct?
A That is correct.
Q What does final decommissioning
mean?
A Final decommissioning is the point
at which the NRC's Part 50 license,
licensee's Part 50 license is terminated.
Q So when does SDG&E expect that the
Part 50 license will be terminated for SONGS
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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Units 2 and 3?
A Assuming that the Part 50 license
remains in place as long as spent nuclear
fuel is on site, it would be in 2052.
Q Are you familiar with the
provisions of the SONGS master trust that
addressed the disbursement of excess funds
from the trust and the termination of the
trusts?
MS. SALUSTRO: Objection. Your Honor,
this witness is a decommissioning NRC
witness. He doesn't work for SDG&E or
Sempra. So master trust agreements for
Sempra are outside the scope of his
testimony.
MR. FREEDMAN: Your Honor, the witness
is free to say that he does not know about
them. However, this question is directly
relevant to his contention regarding NRC
requirements that govern master trusts and
the termination of such trusts.
ALJ BUSHEY: He was referencing IRS
requirements.
MS. SALUSTRO: NRC requirements, your
Honor.
MR. FREEDMAN: My questions, your
Honor, go to the Nuclear Regulatory
Commission requirements. I'm not asking him
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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about Internal Revenue Service code
requirements.
ALJ BUSHEY: The testimony you're
referencing is about the Internal Revenue
Code, though.
MR. FREEDMAN: No. Your Honor, I'm
actually asking about the prior section,
Section C, in which Mr. Levin makes
contentions regarding the Nuclear Regulatory
Commission requirements.
ALJ BUSHEY: Oh, I see. I see. Yes,
you're absolutely correct. Yes. If the
witness doesn't know, he can say he doesn't
know.
THE WITNESS: I have read the master
trust agreement for San Diego Gas and
Electric.
MR. FREEDMAN: Q And are you aware
then that the master trust agreement
addresses a threshold -- it references a
point at which SDG&E would initiate a filing
with the California Public Utilities
Commission for return of any remaining funds
in the trust, does it not?
A No, it does not.
Q So you're not familiar with a
reference to the 90 percent threshold of
costs incurred?
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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A I am familiar with that reference.
Q From your perspective, what does it
mean?
A As I understand the trust
agreement, it says that at the 90 percent
threshold of costs that have been
anticipated, any further disbursements
require the -- require a submission to the
CPUC for any further disbursements for costs
incurred.
Q Don't all disbursements require a
filing with the Public Utilities Commission?
A I don't know if I can answer that.
Q So you don't know what the
difference would be regarding PUC filing
requirements before and after the 90 percent
threshold?
A I do not have complete knowledge of
that.
Q And so to the extent that there
were any provisions in the master trust that
called for a potential termination of the
trust prior to the termination of the Part 50
license, it's your contention that that would
be a violation of NRC requirements?
A Can you repeat that? There was
something I didn't quite catch in the middle.
Q So to the extent that there's any
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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provision of the master trust that specifies
the potential termination of the trust prior
to the termination of the Part 50 license, is
it your contention that that would violate
NRC rules?
A I'm not aware of anything in the
trust that potentially talks about
termination of the trust prior to termination
of the NRC license.
Q Are you familiar with, when you're
referencing NRC rules, are you referencing 10
CFR Part 50.75?
A And associated guidance.
Q Now, the NRC guidance, doesn't it
mention that transfers are permissible to
another financial assurance method prior to
the completion of decommissioning?
A I make that statement in my
testimony. That is correct.
Q And what other financial assurance
methods are acceptable under the NRC rules?
A Financial assurance methods under
NRC regulations are either a sinking fund or
a nonbypassable surcharge, a letter of
credit, or another method as approved by the
Nuclear Regulatory Commission.
Q And does that also include
prepayment? Is that one of the methods
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that's permissible?
A That is correct.
Q And dose the NRC also permit a
surety method, insurance, or other guarantee
method?
A I recall that being part of 10 CFR
50.75 financial assurance methods, but I
believe that that method was something that
the NRC has removed from 50.75.
Q So if I were to look at the current
version of 50.75 subpart (e)(1) little 3 that
states a surety method, insurance, or other
guarantee method is permissible, you're
saying that that doesn't exist anymore if I
were to look for that subdivision?
A If that is the current regulation,
then you are correct.
Q So is it fair to say that the NRC
allows multiple methods of complying with
these requirements for adequacy of
decommissioning funding?
A Yes.
Q And that the maintenance of an
external sinking fund is not the sole method
that satisfies NRC requirements?
A That's correct.
MR. FREEDMAN: Thank you. I have one
cross-examination exhibit at this time, your
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Honor, I'd like to distribute.
ALJ BUSHEY: Okay. We'll be off the
record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record we
numbered Exhibit 25, TURN cross-examination
exhibit.
(Exhibit No. 25 was marked foridentification.)
ALJ BUSHEY: Mr. Freedman.
MR. FREEDMAN: Thank you, your Honor.
Q This exhibit contains the response
by SDG&E to TURN Data Request Set 1, Question
3. Mr. Levin, are you sponsoring or are you
the author of this response?
A I am sponsoring this response.
Q Great. And in this response SDG&E
is asked what approvals might be required
from the NRC for transfer of funds between
qualified nuclear decommissioning trust
funds, and the answer is:
At a minimum a temporary
exemption request from 10 CFR
50.82(a)(8) would have to be
approved by the NRC in order to
move a facility's funds from
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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one unit's trust to another
unit's trust.
Do you see that?
A Yes, I do.
Q Why would an exemption from 10 CFR
50.82 be required?
A NRC regulations require that
licensees have a dedicated decommissioning
trust fund for each nuclear unit for each
nuclear license. And 10 CFR 50.82 identifies
the limitations with respect to the
expenditures of those funds. One part of 10
CFR 50.82 identifies that withdrawals from
those funds can be made for legitimate
decommissioning expenses.
The NRC has taken the position that
transfer of trust funds from one unit to
another does require an exemption. And I'll
cite that by talking about an exemption that
was filed that I'm familiar with by Arizona
Public Service for Palo Verde, the Palo Verde
site which has three units. And in that
exemption request APS requested the ability
to move decommissioning funds up to $5
million from Unit 1 decommissioning trust to
the Unit 3 decommissioning trust. And as I
said, that required an exemption approval by
the NRC.
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Q Mr. Levin, was that request for an
exemption for Palo Verde approved?
A Yes, it was.
MR. FREEDMAN: Thank you. Thank you,
Mr. Levin. Those are all my questions.
ALJ BUSHEY: Mr. Peffer.
MR. PEFFER: Your Honor, Ms. Gilmore
will be conducting questioning.
ALJ BUSHEY: Okay.
MS. GILMORE: Okay. Sorry. Didn't
have my glasses on.
MR. PEFFER: Your Honor, if it's
possible, I'd like to reserve five minutes
possibly after the break for this witness.
ALJ BUSHEY: For what purpose?
MR. PEFFER: I'd like to ask some
followup questions potentially, but we need
to do some printing first. We will subtract
that from this. So there shouldn't be any --
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Ms. Gilmore. Ms. Gilmore, are you
ready to begin your questioning?
MS. GILMORE: Yes.
MR. PEFFER: Your Honor, Ms. Gilmore
would like to approach the bench. She has
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some exhibits.
ALJ BUSHEY: Exhibits.
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Ms. Gilmore, your first question.
CROSS-EXAMINATION
BY MS. GILMORE:
Q Okay. My first question is, all
right, on page 7 it starts, line 16, you
know, Witness Gilmore argues spent fuel pools
are only viable method to remediate a failed
spent fuel canister. And then on the next
page I reference the DOE document stating in
order to repackage a used nuclear fuel waste,
that's another term for spent fuel canister,
that it would require, according to the DOE,
it would require either a storage pool or a
hot cell facility.
MS. SALUSTRO: Objection, your Honor.
I understand that Ms. Gilmore is reading what
she --
MS. GILMORE: Yeah. I just was putting
it in reference for the question.
ALJ BUSHEY: Okay. Ms. Gilmore, you
don't need to do that.
MS. GILMORE: Okay.
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ALJ BUSHEY: You don't need to read
anything. It's already in the record.
MS. GILMORE: Okay. All right. Okay.
Q So regarding your mention of
repairing a canister as an option, what were
you using as your interpretation of failed
spent fuel canister when you were responding
to that?
MS. SALUSTRO: Objection. Could we get
a reference to --
MS. GILMORE: He's saying -- he's
saying that repairing is an option.
ALJ BUSHEY: Ms. Gilmore, a line
reference, please.
MS. GILMORE: Q Okay. I'm sorry.
Line 3 references a failed spent fuel
canister. So you're making a statement that
I should have considered the canister can be
repaired. I'm asking you what your
definition is of a failed spent fuel
canister. You were responding to that.
MS. SALUSTRO: And your Honor, I have
to object here. This is twisting not only
Mr. Levin's written testimony, but also Ms.
Gilmore seems to be twisting her own
testimony that's quoted here. ]
MS. GILMORE: Okay. I'm making it
simple.
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Q What is your -- what is your
definition -- on line 3 it says failed spent
fuel canister. What is your understanding of
the term, "failed spent fuel canister," when
you were responding to this?
MS. SALUSTRO: And again, your Honor, I
have to object because all he's doing is
quoting Ms. Gilmore on the previous page.
ALJ BUSHEY: Right. Sustained.
Ms. Gilmore, he's just quoting you.
MS. GILMORE: All right. I'll go
further down, and we'll get to this. Okay.
All right.
Q Down in tools to repair a flawed
canister, line 26. Are you aware of any
tools that are currently available today to
repair a canister -- successfully repair a
canister filled with spent nuclear fuel?
A In my testimony on lines 25 and 26,
I've said, "my experience absent tools to
repair a flaw." So that is correct. I am
not aware of any tools.
Q Okay. All right. So -- okay. So
you're not aware of any tools. Okay.
So are you aware of any other
options besides future repair tools or pools
or hot cell to deal with a failed canister?
MS. SALUSTRO: Objection, there's a
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lack of foundation. I'm not sure any of
those methods have been substantiated.
MS. GILMORE: Okay. Well, I have to
learn how to ask questions better.
ALJ BUSHEY: Okay. Ms. Gilmore, hold
on.
Isn't the answer, Mr. Levin, to the
question found at the top of the next page?
THE WITNESS: Yes, it is, your Honor.
ALJ BUSHEY: Okay.
MS. GILMORE: Okay.
ALJ BUSHEY: Ms. Gilmore, this is
already in the record.
MS. GILMORE: Well, I'm trying to
understand -- okay -- his point here. Okay.
All right.
Q Let's go to line 10 on page 9 where
you say that -- your belief that the DOE will
proceed with developing tools for repairs.
Are you aware of any projects -- you know,
what -- is your belief based on any documents
or knowledge of -- of project in place to --
to do this?
A I'm sorry. Can you repeat which
line you're on?
Q On number -- line 10, where you
state, "It is my belief DOE will proceed with
developing tools for making any needed
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repairs down the road."
A Yes, I stated that in line 9 that
DOE has programs in flight to develop tools
for inspecting canister surfaces, and I
identified a reference by Dr. Marshman at
Idaho National Laboratory.
Q No, my question is regarding tools
for making repairs, not for inspecting. It's
the second part of your statement.
A And my response is that you need to
have tools to identify the flaw. And down
the road, DOE will follow on with development
of tools to repair the flaws.
Q Okay. But my question is are you
aware of any projects that are in the queue
for the repair part.
A I'm not aware of any.
Q Okay. All right. That's what I
needed to know there.
Okay. This may go -- this may go
-- this may go quicker than I thought.
And -- and your -- wait a minute.
Okay. Page 9, line 4. So you say that it
can be placed in a larger canister, oversized
concrete storage module. Are you aware of
any NRC-licensed cask or canisters to do
this?
A It would require an amendment to
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any of the existing systems as I know about
them today.
Q Okay. Are you aware of any
currently licensed vendor that has a larger
canister available that they could put into a
slightly oversized concrete storage module?
A Again, it would require an
amendment to the systems that I'm aware of
today in order to do that.
Q Okay. Could it possibly require a
new license as opposed to just an amendment?
Are you sure it's just an amendment?
MS. SALUSTRO: Objection, your Honor,
it's asks for hypotheticals based on --
MS. GILMORE: I'm just asking -- I'm
just trying to clarify that he said a license
amendment, and I'm asking is it possible that
it could require a new license versus an
amendment.
ALJ BUSHEY: Ms. Gilmore, when a
witness' attorney objects --
MS. GILMORE: Oh, I'm sorry. I'm
sorry.
ALJ BUSHEY: Let's hear the objection.
MS. SALUSTRO: My objection is it's a
hypothetical based on uncertain facts. In
addition, we've asked several questions on
this point. I'm not sure if this line of
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questioning is helpful getting to the
determination of the reasonableness of the
estimate.
ALJ BUSHEY: The witness has provided
testimony asserting that the failed canister
could be addressed by this means and is being
cross-examined on what it would take to get
permission to do that. That seems to be
within the scope of the witness' testimony.
Whether that -- how that plays, if
at all, into the reasonableness determination
is another story. This witness has presented
testimony, and questions are being asked
regarding his testimony. So on that basis,
I'm going to overrule your objection. The
witness can answer if he knows.
THE WITNESS: It is my opinion that it
would require a license amendment and not a
new license.
MS. GILMORE: Q Okay. Can you give an
example of a -- a canister that would --
would have a -- that could get a license
amendment for this?
MS. SALUSTRO: That one I have to
object to, your Honor.
MS. GILMORE: Because a license
amendment assumes --
ALJ BUSHEY: Ms. Gilmore, we have
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another objection.
MS. GILMORE: I'm sorry. I'm sorry.
Objection. I'm sorry.
ALJ BUSHEY: Okay. And the objection
is?
MS. GILMORE: Calls for speculation and
in addition is calling for the witness to
speculate about an NRC action determining
whether -- what kind of license amendment
would be needed for what kind of canister.
ALJ BUSHEY: I was kind of thinking
asked and answered was where I was going with
this.
Ms. Gilmore, he's already said he's
not aware of anyone whose done this.
MS. GILMORE: Well, he's -- he said --
can I rephrase?
ALJ BUSHEY: Yes, Mr. Peffer?
MR. PEFFER: Your Honor, can I ask
that Ms. Gilmore be allowed to complete her
question before objections are lodged. She
was in the middle of the question, and she
was interrupted.
ALJ BUSHEY: I believe it was
completed.
Ms. Gilmore, had you completed your
question?
MS. GILMORE: Yeah. Well, yeah. Can I
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just -- maybe there was a thought missed
there. He -- we're here to kind of validate
the witnesses; right? To -- the credibility
or their knowledge; right? That's the part
of what --
ALJ BUSHEY: Right.
MS. GILMORE: Okay. So when he says
that, "Oh, you need a license amendment,"
that means existing canisters that are
currently approved by the NRC would be the
only ones eligible for an amendment.
Otherwise you need a new license.
ALJ BUSHEY: Okay. Ms. Gilmore, now
you're testifying.
MS. GILMORE: No, but I was trying to
explain where I was going with my question,
but --
ALJ BUSHEY: The purpose of
cross-examination is not to explain where
you're going.
MS. GILMORE: Okay. All right.
ALJ BUSHEY: You get a fact on the
record, and then you use that in your brief.
MS. GILMORE: Right.
ALJ BUSHEY: And you explain in the
brief.
MS. GILMORE: Right. And I was trying
to get another fact on the record.
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ALJ BUSHEY: Okay. What fact that's
not now in the record that you would like to
get in the record?
MS. GILMORE: I would like for him to
say what -- what approved canisters or casks
might be eligible for this license amendment.
He's saying a license amendment. To what --
to -- to -- to what existing canister, what
existing system?
ALJ BUSHEY: Let's see if the witness
has particular system in mind for an
amendment, or would any licensed --
THE WITNESS: Any licensed
canister-based dry cask storage system could
seek an amendment to allow that system to be
packed into a -- an oversized canister.
ALJ BUSHEY: Does that complete the
facts that you require, Ms. Gilmore?
MS. GILMORE: Q Would a transfer cask
be one of those for a license amendment?
A The transfer cask is a different
entity.
Q Okay. I just want --
A The transfer cask is licensed with
-- typically licensed with a system in its
original license in order to move canisters
between a storage overpack in the spent fuel
pool.
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Q Correct. I understand. What I'm
asking is -- would -- so would a -- just kind
of yes or no. Would a transfer cask
potentially be a cask that could get a
license amendment to store a failed canister?
Just yes or no.
A What would need to change for a
transfer cask is the certificate of
compliance and operations associated with the
transfer cask in the final safety analysis
report that says how long a canister can
reside in a transfer cask. And so it would
likely not be a new license. It would likely
not be a license amendment. It would be a
change of operating system requirements that
may or may not necessarily require the
license amendment.
Q Would it require an -- a license
exemption?
A Possibly, but I would expect it to
be an engineering change that's performed
under 10 CFR 72.48.
Q Okay. Would a transport -- a
transportation cask be a possible option for
a license amendment?
MS. SALUSTRO: Objection, asked and
answered.
MS. GILMORE: No, that was a transfer
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cask -- sorry. Sorry.
MS. SALUSTRO: Now we're getting to
transfer cask. I'm not sure how that relates
back to his testimony about packaging into a
storage module.
ALJ BUSHEY: Ms. Gilmore, we're --
we've gotten quite a long ways from the
witness's direct testimony.
MS. GILMORE: Well, he's -- he's
claiming that you can do this, so that's --
ALJ BUSHEY: Right. And you're
quizzing him on exactly what type of
permission would you need from the NRC. That
may or may not have any bearing on whether
this is technically feasible at all.
MS. GILMORE: Well, I -- I -- you know,
can I -- can I have a little latitude on
these questions because I --
ALJ BUSHEY: I've given you quite a bit
of latitude.
MS. GILMORE: All right. All right.
Because this is extremely relevant to -- to
the decommissioning -- the decommissioning.
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Mr. Geesman?
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MR. GEESMAN: Thank you, your Honor.
CROSS-EXAMINATION
BY MR. GEESMAN:
Q Good morning, Mr. Levin?
A Good morning, Mr. Geesman.
Q I'm John Geesman for the Alliance
for Nuclear Responsibility.
I would like to turn your attention
to Exhibit 18, which is your prepared direct
testimony. And go to page 9, lines 18
through 22 where you're talking about the DOE
pilot ISF program. And I believe ISF is
identified in your testimony as an acronym
for interim storage facilities.
Your reference is to a pilot
program, and my question is is your belief
that 2024 is a reasonable assumption for the
commencement of DOE acceptance of spent
nuclear fuel -- is your belief premised on
this pilot program taking place?
A I discussed the pilot program in my
testimony in as much as I used that to help
me validate the position that the
decommissioning cost estimate has taken that
2024 as a reasonable date. And based upon
that validation, I've concluded that the 2024
date is a reasonable date.
Q If there were no pilot program,
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would you reach the same conclusion?
A If there were no pilot program
today, I would reach the same conclusion.
However, I expect that -- as I've mentioned
in my testimony that legislation will be in
place by 2017, which will allow a pilot
program to be enacted and to begin in 2024.
Q I'd like to turn to page 8 of that
same exhibit. At lines 18 through 21, you
make reference to a Executive Order by
Governor Gray Davis from 2002. Could you
elaborate a bit more on what that Executive
Order does and how it relates to the
decommissioning cost estimate?
A Without the order in front of me, I
cannot at this time elaborate completely.
However, my familiarity with it tells me that
it potentially prevents municipal landfill
waste by governor order to be disposed of
from a nuclear facility in the state of
California.
Q And that would then focus the plant
owners on scrap metal recyclers or a
out-of-state municipal landfill?
A That is my understanding as
reflected in the decommissioning cost
estimate.
Q Do you know whether or not the
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plant owners have sought any variance from
this Executive Order?
A I do not.
Q I'd like to go to Exhibit 20, which
is your rebuttal testimony, and turn to page
11?
A I'm focused on Section B, which
occupies lines 1 through 19 of page 11. And
I'd like to make certain I've got the
arithmetic correct.
I look at line 6 and 7 where you
attribute to turn an estimate of
$441 million, and then you at line 16
indicate that 95 million of that is for the
intake and discharge conduit. So you believe
that ought to be subtracted from the
$441 million, which if I do that math is 441
minus 95, or $346 million attributable to the
Navy easement.
MS. SALUSTRO: Objection, your Honor.
I think Mr. Geesman is looking at the -- I
withdraw that objection.
ALJ BUSHEY: Well, I have just a -- I
didn't hear an actual question in there.
What is the question?
MR. GEESMAN: Q Is my math correct?
$346 million should be attributable to the
requirements in the Navy easement for Site
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Restoration Period 5?
A I'll assume your math is correct.
Q Thank you. Then I would like to go
to pages 6 and 7. On page 6 --
A Excuse me, Mr. Geesman. Which
exhibit?
Q Oh, I'm sorry. I'm still on
Exhibit 20.
A Thank you, sir.
Q On page 6 I'm looking at that
numbered Paragraph 2. On line 14, you say,
"The SONGS DCE assumes all clean concrete
demolition debris is disposed of at an
out-of-state Class 3 landfill."
I want to clarify when you say,
"all," you mean not just that which is
three feet below the subsurface. You mean
all?
A Beyond three feet below existing
grade, yes.
Q Okay. And in line 17, you
attribute a cost impact of 237.8 million to
that requirement, including the contingency?
A The $237.8 million is the disposal
cost for that material.
Q Okay. Then I go to page 7, lines 2
and 3. You indicate that the SONGS estimated
cost impact is 297.8 million, including the
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contingency. And I believe that also
includes, does it not, the intake and outfall
facilities as well? Is that correct?
A That is correct.
Q I want to go through another
arithmetic question, and I'm focused on
Footnote 21 on page 7. And I start with the
441.5 million. That includes the intake and
outfall facilities; correct?
A For the complete disposition,
including labor, burial, et cetera, that is
correct.
Q I subtract 297.8 million to cover
that below three feet of the subsurface
requirement that only applies to SONGS. Am I
correct in doing so?
A I don't understand what you're
saying when you say, "Am I correct in doing
so?" Is there something --
Q Where I'm trying to go is a cost
number to attribute to this Executive Order,
the Executive Order which forces the plant
owners to find scrap recyclers or an
out-of-state landfill in which to dispose of
this uncontaminated rubble.
And I believe based on your
testimony, the correct way for me to do that
is 441.5 million minus 297.8 million. I'm
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asking if that is the appropriate way to look
at the effect of this Executive Order?
A I understand what you're looking
for. Without my workpapers in front of me
and the cost estimate to look at -- there may
be some other costs that should be in or out
associated with that, so I'm afraid I cannot
give you an answer at this time.
Q Do you know what the general
magnitude of those other costs would be? Is
it 10 percent? 20 percent?
MS. SALUSTRO: Objection. If
Mr. Geesman could be more clear about what he
means by those other costs?
MR. GEESMAN: Q The other costs that
you are concerned that without access to your
workpapers you can't give me a precise
number.
A I refrain from doing so without
having that information in front of me.
MR. GEESMAN: Thank you very much.
THE WITNESS: Sure.
MR. GEESMAN: That completes my;
questioning, your Honor.
ALJ BUSHEY: Okay.
Ms. Gilmore?
MS. GILMORE: Okay.
ALJ BUSHEY: Are you ready with your
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last questions?
MS. GILMORE: Okay.
CROSS-EXAMINATION (Resumed.)
BY MS. GILMORE:
Q Page 10.
ALJ BUSHEY: Of what exhibit?
MS. GILMORE: Of Exhibit 19.
Q And a paragraph that starts on line
13 of page 10. You're -- let's see. Is the
paper that you're referencing here in
Footnote 35 for -- for what kind of
repository? What kind of facility?
A The document I'm referencing in --
in Footnote 35 here simply is a discussion of
how the DOE may go about picking up canisters
from retired nuclear units.
Q Does it relate to interim storage
facilities or permanent repositories?
A I do not recall any discussion in
that document about a permanent repository.
I -- and with respect to the interim storage
facility, it addresses it only from the
standpoint that it would be the intent that
these canisters would go to an interim
storage facility.
Q Could you describe what an interim
storage facility is?
A An interim storage facility is a
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facility that will allow spent nuclear fuel
to be picked up from nuclear -- commercial
nuclear plants in advance of there being
available a deep geologic repository for
disposal. The interim storage purpose is
exactly that, for storage until a repository
is available.
Q And what kind of storage is used
for interim storage? What type?
A The technology would be very
similar to if not the same as the technology
that's currently used at commercial nuclear
plants.
Q So could you describe -- describe
at a very high level the process of moving
the existing fuel to the interim? Just a
very high level. I'm sure the Judge will
appreciate I said very high level.
A Are you requesting that I identify
the fuel that is in dry storage at a nuclear
plant?
Q Yeah, yeah, in dry storage.
A Or in wet storage?
Q Already in dry storage.
A The way that would happen is that
the Department of Energy would provide a
transportation cask of some sort into which a
canister of spent fuel at a retired reactor
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site or at an operating reactor site would be
transferred to be transported to the
Department of Energy. ]
Q And would this be using the
existing canisters that are there?
A That is the discussion that is in
this document.
Q Correct. Okay. Would those
canisters be inspected for any corrosion or
cracks prior to being transported?
A It's not a question or something I
can answer.
Q Okay.
A I'm not aware of it.
Q All right. Now, if it wasn't an
interim facility using the existing
canisters, if it was to take to a permanent
repository, which is what the current, you
know, law is, would the process be the same?
Would they be taking the canisters in the
existing canisters?
A That's speculation. I don't know.
Q We don't know. Okay. That's what
I wanted to -- that's what I wanted to --
On page 9, line 7, would you
describe what a transportation overpack is,
what the purpose of it and what it is?
A A transportation overpack, the
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purpose of it is to provide a conveyance of
package that allows spent nuclear fuel to be
moved outside or off of the plant site
boundary.
Q To?
A Wherever it may go.
Q Okay. Now, is the -- is this
normally -- what is this normally made out
of?
A It's normally made out of steel and
lead.
Q Is the steel normally thicker than
the thin canisters that it's currently in?
A You'll have to help me identify
what you're talking about.
Q Well, the -- we're putting here the
failed canister into a transport overpack.
So the thin canister goes into an overpack
for transport. Does this canister have any
additional barriers for, say, radiation or
requirements that the thin canister doesn't
have?
A The purpose of the thick canister
is threefold. It provides radiation
shielding. It provides structural support.
Q Is it designed to be reusable?
MS. SALUSTRO: Your Honor, if the
witness could -- I'm not sure if he was done
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with his answer.
MS. GILMORE: Sorry, sorry.
ALJ BUSHEY: All right. Ms. Gilmore,
why don't we let the witness finish his
answer.
MS. GILMORE: Okay.
ALJ BUSHEY: Okay. And let's confine
it to the reference he's made in his
testimony and not ask him to speculate about
other things.
MS. GILMORE: Okay.
ALJ BUSHEY: Okay. So if the witness
would complete his answer.
THE WITNESS: The transportation
overpack provides three functions. The first
is radiation shielding. The second is
structural support. And the third is
confinement.
MS. GILMORE: Q Are these designed to
be reusable?
A Typically that is the goal.
Q Is the cost ratio between the thin
canisters and the transport overpacks
significantly different?
A Yes.
Q In page 10, okay, on page 10 on the
paragraph 7 starting on line 7. Let me know
when you're there.
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A Yes.
Q Okay.
A Same exhibit?
Q Yes. Same exhibit. Yeah. Okay.
Now, where you reference that the spent fuel
pool gave Crystal River the ability to reopen
and repackage the fuel into any size
DOE-provided system, how would we -- is there
any way to do that without a pool?
A It may be possible.
Q And what might that be?
A It would require an in-air transfer
of spent fool assemblies, shielded spent fuel
assemblies.
Q Is there a name that they usually
call these facilities?
A Not that I can think of.
Q Okay. Dry transfer. Are you aware
of any of these? I'll just call it dry --
you said like a dry transfer type.
Are you aware of any of these
facilities that exist that are large enough
to perform this function?
A There was an experimental design
that I'm aware of that was up at the Idaho
National Laboratory.
Q Does that facility still exist?
A I do not know.
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Q Do you know what the cost of
roughly of building one of those facilities
would be in order to perform this function?
A I do not.
Q Would you think it would be
significant?
MS. SALUSTRO: Objection. Vague and
ambiguous.
ALJ BUSHEY: The witness says he
doesn't know.
MS. GILMORE: Okay. All right.
Q And do you, you know, do you know
why Crystal River would want to be able to
repackage the fuel in a DOE-provided system?
A Yes, I do.
Q And what is that reason?
A The reason is if the Department of
Energy provided a transportation system that
required a smaller package or a smaller
amount of spent fuel in it.
Q Okay. Is there a current
requirement that the utilities be able to do
that, provide the fuel to be put in a DOE
canister?
A No.
Q Would their standard contract?
A The standard contract simply
identifies a standard waste form, which is a
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fuel assembly. It does not specify package
sizes.
Q No. But it specifies that you need
to be able to put the -- it doesn't specify
the container it goes in. I understand that.
But that the fuel assemblies need to be able
to go into a DOE canister. Is that what
you're saying? I'm trying to make sure I
understand.
A It does not specify that.
Q It does not. Does the NRC require
that spent fuel assemblies be retrievable
from a canister?
A The NRC is currently reviewing what
retrievability means.
Q But under the current existing
requirements?
A Retrievability is on an assembly
basis.
Q Yes. Okay. Thank you for that.
Okay. In terms of, are you -- in terms of --
so do you know how long the thin type of
canisters have been in use roughly?
MS. SALUSTRO: Your Honor, I'm going to
object. I'm not sure what relevance that is
to Mr. Levin's testimony.
ALJ BUSHEY: Ms. Gilmore, do you have
a --
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MS. GILMORE: Q Well, we're talking
about -- okay. Let's go down to page 9, line
9. Okay. The whole paragraph there. Okay.
So in here we're discussing developing tools
to inspect, developing tools to repair. This
obviously assumes something went wrong. So
what would you -- how do --
MS. SALUSTRO: Your Honor, objection.
MS. GILMORE: Hold on. I need to
gather my thoughts here.
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Mr. Lutz.
MR. LUTZ: Thank you.
CROSS-EXAMINATION
BY MR. LUTZ:
Q Ray Lutz with Citizens Oversight.
Good morning.
A Good morning.
Q I'm looking at your testimony
regarding the pilot ISF operation, and this
is on page 9, lines 15 through 18. I'm not
sure what exhibit number this had on it.
Sorry. My eyes are getting bad. Let me get
my glasses out. Okay. Here you say that --
A I'm sorry. Can you clarify the
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exhibit for me, please.
Q It's SDG&E-01-R-E-A.
MR. GEESMAN: Exhibit 18.
MR. LUTZ: Is that No. 19?
MR. GEESMAN: 18.
MR. LUTZ: 18 is the number that you
guys have assigned.
ALJ BUSHEY: What page?
MR. LUTZ: Page 9 and lines 15 through
18 is what I'm referring to.
Q Do you see those lines starting
with, "The DOE-assumed start date"?
A Yes.
Q Okay. In this passage it
references that it was predicate -- the start
date was predicated on work beginning by
January 2014, but then it goes on to say it
has yet to be launched. So is the schedule
slipping for the pilot ISF program?
A As I've mentioned in my testimony
here, DOE recognizes that federal legislation
will be in order for them to move forward,
and federal -- it's reasonable to make an
assumption at this point that legislation can
be acted, enacted by 2017. That legislation
is already in process.
Q Has the -- are you aware of any
investigation by the utilities into an
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in-state off-site ISFSI, or what we call it
here, a interim storage facility within
California?
MS. SALUSTRO: Objection, your Honor.
By investigation, if Mr. Lutz could clarify
what he means by that.
MR. LUTZ: Q Well, in other words, in
order to create a interim storage facility,
you would have to have a site for it, a
location, transportation to it and so forth.
So there was a lot of issues regarding where
it might be. Has there been any discussion
or investigation into a location in
California that you are aware of regarding
those issues?
A The only thing I'm aware of is what
I've read in the newspaper.
Q Okay. So all right. Because
you're not really part. Have you read
anything in the newspaper about a -- since
you're an expert in this area, on a interim
storage facility within California?
A That's about the level of my
knowledge, yes.
Q So you haven't heard anything?
A Not in detail, no.
MR. LUTZ: Okay. Thank you very much.
ALJ BUSHEY: All right. Ms. Gilmore,
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are you prepared?
MS. GILMORE: Yeah.
CROSS-EXAMINATION (resumed)
BY MS. GILMORE:
Q Okay. Page 9, line 7.
A Of which exhibit?
Q Exhibit 19.
A I'm sorry. You said page?
Q Page 9, line 7. It's the third
bullet.
A Yes.
Q Ready? Okay. All right. Once you
have this canister in the transport overpack,
then what do you do with it? How do you --
you know, what's the plan for it after that
to -- you know, what would you do with it
after you do that?
A Research the options as to whether
it needs to be repaired.
Q Okay. You don't have repair
technology yet?
A I would first search the options to
see if it needs to be repaired.
Q Okay. Well, that's -- it's a
failed canister. And so what you're saying
is you would -- okay. Assume it needs --
assume it needs repairing or assume it is a
failed canister, meaning it has cracks. So
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then what do you do after you have it in this
transport overpack? Then what do you do with
it?
A Well, again, I would first evaluate
it to see if it needs to be repaired and if
necessary either seek an exemption from the
NRC to accept the canister as is or determine
what my repair technology might be.
Q Okay. Assuming we don't have the
repair technology yet, which is what's in
your statement, if there was a site for it to
go to, which is the eventual plan, would we
be able to transport a -- would you be able
to transport a failed canister in this
transport overpack, canister with cracks in
it?
A To be able to provide an opinion on
that requires somebody with some structural
engineering background, and I'm not of that
ilk.
Q Or have you read any technical
specifications for any of these canisters to
see what the requirement is or what the
requirements are for transportation
overpacks, that they would allow a transport
of a cracked canister?
MS. SALUSTRO: Your Honor, can I
object. This is going pretty far afield.
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His testimony here we've discussed quite a
bit, and his testimony was just laying out
something that Exelon staff had identified as
what to do if there was a suspected failed
canister. It doesn't go into transporting to
off-site storage and so on.
ALJ BUSHEY: I'll sustain your
objection. The witness has already said he
doesn't know. He's not qualified to opine on
this.
MS. GILMORE: He doesn't know. Okay.
That's fair. Okay.
Q Do you have any knowledge of how
long it's going to take to develop inspection
technology?
A No.
Q No. Okay. Or how long it would
take to develop repair technology?
A No.
Q No. Okay. All right.
ALJ BUSHEY: Does that conclude your
questions, Ms. Gilmore?
MS. GILMORE: Yeah. Let's see.
ALJ BUSHEY: Redirect?
MS. GILMORE: I think that's -- I think
that's it.
ALJ BUSHEY: Good. Thank you, Ms.
Gilmore.
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Redirect, Ms. Salustro.
MS. SALUSTRO: Yes, your Honor.
REDIRECT EXAMINATION
BY MS. SALUSTRO:
Q Mr. Levin, do you recall the line
of questionings that TURN asked you about the
SDG&E master trust agreements?
A Yes, I do.
Q For clarification, you did not
author the SDG&E six master trust agreements,
did you?
A I did not.
Q Are you at all responsible for
administering the master trust agreements?
A I am not.
Q Or interpreting the master trust
agreements' meaning?
A I am not.
Q Mr. Levin, do you acknowledge that
the nuclear decommissioning trusts, again
that you were discussing with Mr. Freedman
earlier, are not only subject to NRC rules
but also subject to IRS rules?
A Yes.
Q Ms. Gilmore asked you several
questions about the availability or the
existence of tools to repair canisters. Do
you recall your response of the existence of
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these tools?
A I believe I responded that the
tools for repair do not exist.
Q Thank you. Mr. Geesman from A for
NR asked you several questions about numbers
as they related to navy easements. If I
could take you back to those pages. I'm
sorry. I don't have the reference
immediately handy. Oh, I'm sorry.
Exhibit 20, pages 6 and 7.
A Yes.
Q On page 6, paragraph 2, which runs
from 14 to line 18, isn't it true, Mr. Levin,
that this paragraph is discussing the
estimated cost of disposal as that relates to
the California executive order?
A That is correct. And I believe I
made that statement previously.
Q And then further down on lines, on
page 6, paragraph 3, starting at line 19
which carries over to the next page, this
paragraph and your estimate here relates to
site restoration; is that correct?
A That is correct. Including all
costs associated with that.
Q And when you say all costs, I
believe that was a reference to line 21 --
I'm sorry -- footnote 21 on page 7?
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A That's correct.
Q And for clarity you said that the
number that appears in footnote 21 included
not only the costs mentioned in paragraph 3
about site restoration but also costs such as
labor that would be associated with that?
A That is correct. Labor, equipment,
materials, etcetera.
MS. SALUSTRO: One moment, your Honor.
ALJ BUSHEY: Off the record.
(Off the record.)
ALJ BUSHEY: Back on the record.
Ms. Salustro.
MS. SALUSTRO: Yes. Thank you.
Q Mr. Levin, were you present for Tom
Palmisano's testimony?
A Yes, I was.
Q Do you recall this statement in his
testimony on the stand that repair technology
exists although tools would need to still be
developed?
A Yes. His statement is, was that,
technology exists, the tools need to be
developed.
Q Do you agree with that statement?
A Yes, I do.
MS. SALUSTRO: No further questions.
ALJ BUSHEY: Thank you. Final
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questions? Mr. Geesman.
MR. GEESMAN: Recross.
ALJ BUSHEY: Yes. Of course confined
to the new material.
RECROSS-EXAMINATION
BY MR. GEESMAN:
Q Mr. Levin, based on the numbers in
your testimony and your responses to Ms.
Salustro's redirect, how would you isolate
the additional costs for compliance with the
navy easement attributable to the executive
order you cite in your testimony?
MS. SALUSTRO: Your Honor, that's a
mischaracterization. The executive order is
about waste disposal. The navy easement is
about as Mr. -- when Mr. Geesman was walking
through the numbers, he was referencing
numbers for the navy easement about site
restoration. They're two separate
categories.
ALJ BUSHEY: Well, it would help the
record I think if we were clear as to whether
or not -- how these numbers work together,
how the numbers in paragraph 2 and paragraph
3 work together. Is that where you're going,
Mr. Geesman?
MR. GEESMAN: That is.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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EXAMINATION
BY ALJ BUSHEY:
Q Yes. I will just share with you my
understanding, and feel free to correct me if
this is wrong. I'm understanding that these
two numbers are additive. So that
237.8 million plus 297.8 million gets us the
total of the executive order and the site
remediation; is that correct?
A I wish it were that simple.
Q Okay.
A The discussion in paragraph 2 not
only addresses the costs of disposing of the
material that needs to be removed because of
the navy easement but also discusses other
material that may be removed down to the
3-foot mark as an example. So it encompasses
not only the material that's below 3 feet but
all the other material at the site that ends
up going to a municipal landfill.
Q How does that relate to the
297.8 million then?
A Okay. The total costs for doing
the remediation to meet the navy easement as
well as the removal of the intake and
outfalls is $441 million. That's given in my
footnote. Subtracted from that is a portion
of the $237 million.
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Q Right. So the disposal costs --
A Which is applicable only to that
piece of the work.
Q Right. So the disposal costs have
already been taken out, right, of the 441
million?
A No, no, no. The disposals costs
are in there. Okay. So there's a piece of
the 237 which is the total cost of the site.
There's a piece that's associated with the
441. And what I did was backed that piece
out in order to come up with the 297.
Q So the 297 number doesn't include
the disposal costs?
A That is correct. Because I did
not -- I had included the disposal cost in
that Item 2.
Q Right.
A And so I didn't want to double
count for it as I looked through all of these
items here and added them up.
ALJ BUSHEY: All right. Okay. All
right. Ms. Geesman, questions?
RECROSS-EXAMINATION
BY MR. GEESMAN:
Q So how much of the 237 is
attributable to the executive order?
A Again, without my workpapers I
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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can't tell you because that -- when you talk
about that piece associated with the
executive -- oh, excuse me. Let me step
back. You're asking of the 237 what is
associated with the cost of disposal?
Q That's correct.
A Associated with that executive
order?
Q Correct.
A It would be difference between the
441.5 million and 297.8 million.
MR. GEESMAN: Thank you very much.
ALJ BUSHEY: Okay.
THE WITNESS: Thank you.
ALJ BUSHEY: Ms. Gilmore.
RECROSS-EXAMINATION
BY MS. GILMORE:
Q One cross question, recross.
Regarding Tom Palmisano's statement yesterday
bringing up the repair tools, he mentioned
that Calvert Cliffs had a license renewal
approved. Are you aware if there's any
requirements in the renewal for repairing or
inspecting in that license renewal? ]
A I know there are some inspection
requirements. I do not know exactly what
they are.
MS. GILMORE: Okay. Thank you.
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ALJ BUSHEY: Mr. Lutz?
RECROSS-EXAMINATION
BY MR. LUTZ:
Q Okay. In the redirect, there was
mention made of Tom Palmisano's testimony
regarding technology but not tools available,
and the reference was to repair. There was
also another reference in that his testimony
which was regarding inspection. And from my
memory, I remembered that inspection was
possible, but the tools weren't available.
Do you agree that with inspection, the tools
are not available?
MS. SALUSTRO: Objection, your Honor,
this goes beyond my limited --
MR. LUTZ: Well, I disagree with you
that the -- I'm sorry.
ALJ BUSHEY: I understand that you
disagree with it. But when you're on
recross, you have been confined just to the
new material. And Ms. Salustro only asked
about a narrow range of Mr. Palmisano's
testimony.
MR. LUTZ: Well, let me just say that
-- before I ask, can I go off the record for
a second?
ALJ BUSHEY: We'll be off the record.
(Off the record.)
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ALJ BUSHEY: We'll be back on the
record.
Final questions for this witness?
(No response.)
ALJ BUSHEY: Hearing none, then the
witness is excused.
Ms. Salustro, would you like to call
your next witness?
MS. SALUSTRO: Yes, your Honor.
MR. LUTZ: Here you go.
MS. SALUSTRO: Thank you.
Yes, your Honor. SDG&E calls
Ms. Tracy Dalu.
TRACY M. DALU, called as a witnessby San Diego Gas and Electric Company,having been sworn, testified asfollows:
THE WITNESS: I do.
ALJ BUSHEY: Please be seated.
State your full name for the record
and state your last name.
THE WITNESS: My name is Tracy M. Dalu,
and my last name is spelled D-a-l-u.
ALJ BUSHEY: Ms. Salustro?
MS. SALUSTRO: Thank you.
DIRECT EXAMINATION
BY MS. SALUSTRO:
Q Ms. Dalu, do you have Exhibits 18
and 19 in front of you?
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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A I do.
Q You're sponsoring sections in both
exhibits as indicated in the table of
contents; correct?
A Correct.
Q Were these sections prepared by you
or under your supervision?
A Yes.
Q Do you have any changes or
corrections to make at this time?
A I do not.
Q To the extent that these documents
contain facts, are those facts true and
correct to the best of your information,
knowledge, and belief?
A Yes.
Q And to the extent these documents
contain opinions, do those opinions
constitute your best professional judgment?
A Yes.
Q And do you adopt these exhibits as
your sworn testimony in this proceeding?
A I do.
MS. SALUSTRO: Your Honor, the witness
is available for cross-examination at this
time.
ALJ BUSHEY: Thank you.
Mr. Freedman.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
410
MR. FREEDMAN: Your Honor, I have a
cross exhibit. Can I hand it out at this
time?
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
identified Exhibit 26. It's a TURN
cross-examination exhibit that is an SDG&E
advice letter.
(Exhibit No. 26 was marked foridentification.)
ALJ BUSHEY: Mr. Freedman?
MR. FREEDMAN: Thank you.
CROSS-EXAMINATION
BY MR. FREEDMAN:
Q Good morning, Ms. Dalu.
A Good morning, Mr. Freedman.
Q I'd like to turn to your direct
testimony, Exhibit 18, pages 17 and 18.
A Okay. I'm there.
Q Great. So in this section,
Section 9, where you discuss the nuclear
decommissioning trust disbursement advice
letters, you referenced SDG&E's Tier 3 Advice
Letter 2724-E; is that correct?
A Yes.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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Q Were you involved in the
preparation of that advice letter?
A I provided some of the information
in that advice letter.
Q And you cite this as an example of
a request for interim trust disbursements by
SDG&E; is that right?
A Correct.
Q Okay. Let's take a look. This is
the cross exhibit that's been provided,
Exhibit 26. Do you recognize this as
selected pages from that advice letter?
A I do.
Q I'd like to ask you to turn to the
second page, which actually is page 16 from
the advice letter. There's a section,
Section 6. It's titled, "Comparison of
Recorded Costs to the DCE." Do you see that?
A Yes.
Q So does this section compare the --
the costs that are requested for disbursement
from the trust to those estimated in the DCE
for the relevant time period?
A Yes, it does.
Q And what's the relevant time period
that's being addressed in this advice letter?
A The advice letter is I believe
June 7th, 2013, to December 31st, 2013.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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Q Okay. And does the -- does this
section of the advice letter essentially
identify one of the key challenges to such a
reconciliation being that the DCE includes
costs over a much longer period than the six
months for which SDG&E is requesting the
trust disbursement?
A Yes, it does.
Q So SDG&E here is requesting costs
for six months from a period that runs for
approximately two years in the DCE; is that
right?
A No, SDG&E is requesting costs
through December 31st, 2013.
Q I understand. I guess my question
is -- but the period in the DCE to which this
cost is being compared runs for approximately
two years rather than six months; isn't that
right?
A That's correct.
Q And that's part of the challenge
with providing an accurate comparison for
just that six-month period?
A Correct.
Q Correct?
A We had to allocate the costs
included in the DCE to compare that to our
2013 numbers.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
413
Q And how did -- how did SDG&E
perform this allocation for a shorter time
period?
A I wasn't directly involved in that
allocation.
Q So you don't know whether it's just
a prorated share based on time?
A I believe it would be a prorated
share based on time.
Q Okay. And in the third paragraph
here there's a reference in -- the very first
sentence references SDG&E's limited ability
to directly compare estimated costs in the
early shutdown study to its own incurred
decommissioning costs. Do you see that
sentence?
A I do.
Q Does SDG&E have a strategy or a
plan for addressing this limitation in future
trust disbursement advice letters?
A SDG&E is currently working to
develop their own accounting system that
would align with Edison's accounting system
and allow us to report in the format included
in the decommissioning cost estimate.
Q Okay. So let me continue on in
this exhibit.
If you continue turning through the
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pages, the next page is titled, "Attachment
B," and then the next page after that shows
an estimate of costs recorded during the last
six months of 2013 versus what was in the
DCE; is that correct?
A Correct.
Q And if you were to look at the next
two pages, it shows Attachment C, and that is
followed by a graph that outlines cumulative
estimated spending versus actual cumulative
spending; is that correct?
A That's correct.
Q Is this -- the detail contained in
Attachments B and C consistent with what
SDG&E intends to provide in future advice
letters requesting trust disbursements?
A I believe this is consistent with
what we would provide, but as we receive
additional information, we -- we could -- we
will be able to provide more information.
Q And does SDG&E intend to provide
information that would allow costs to be
tracked by activity?
A Yes, we do.
Q So that's a lot more detail than is
contained in this advice letter; isn't that
right?
A That's correct.
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Q And looking at your testimony,
again back on page 17, you identify elements
that SDG&E will strive to provide at the
bottom of the page there at the bullet point
list to the best of its ability.
A Correct.
Q What -- are there any specific
limitations on SDG&E's ability to provide
this information?
A We're currently working with Edison
to obtain a complete mapping of all the costs
billed to us and be able to identify those
costs with lines and decommissioning cost
estimate. Once we receive that information,
we will be able to provide most of the
information included in this section of my
testimony.
Q How long has SDG&E been working on
this effort to obtain this information from
Edison?
A We started discussions with them in
I believe February of 2015.
Q And if I look at page 18, the last
bullet point at the very top of the page
there, you reference a description of
activities for which a variance of plus or
minus 10 percent between the decommissioning
cost estimate and actual costs incurs. What
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do you mean by a description? Do you mean
simply you would list activities that may be
over or under budget?
A Yes, that's how I would interpret
that.
Q Does that mean there would be a
narrative description or just a list of here
are the activities for which this condition
is true?
A I'm not sure I can answer that
question at this point.
Q And does SDG&E intend to provide
information on adherence to schedules that
are included in the DCE?
A We will provide schedules as long
as we have the information from Southern
California Edison.
Q And do you know whether that
information will show whether individual
activities are ahead of or behind schedule?
A I believe we will receive a report
that would give us that information.
Q And would it also show whether
individual activities are above or below the
cost forecasted in the latest DCE?
A I believe it will.
Q And to the extent that Edison
provides that information to SDG&E, would
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that -- would that information be then
included in the trust disbursement advice
letters?
A We are happy to provide whatever
the Commission asks us to provide.
MR. FREEDMAN: Okay. Thank you,
Ms. Dalu. Those are all my questions.
THE WITNESS: Thank you.
ALJ BUSHEY: Ms. Dalu, I have a
follow-up question for you.
EXAMINATION
BY ALJ BUSHEY:
Q On line 13, page 17, you say, "The
2014 costs have been paid with ratepayer
funds"?
A Correct.
Q Are these not the same cost that's
are pending in the Application 15-02-006?
A I'm sorry? What is the
Application 15-02-0 --
Q 2014 SONGS O&M and non-O&M costs.
I'm on line 13 of your testimony. I'm trying
to understand how those costs could have been
paid with ratepayer funds.
A Those costs were billed to us as
O&M and capital costs.
Q Uh-huh.
A And were recovered through the
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SONGS balancing account or through the SONGS
regulatory asset.
Q Decommissioning costs went to --
A We weren't billed in a
decommissioning format until -- the
decommissioning agreement wasn't signed until
April of 2015, so we were continuing to be
billed as O&M and capital up until January
of 2015.
Q So then what's in the application?
MS. SALUSTRO: Your Honor, I might be
able to provide clarification here. I'm not
sure Ms. Dalu is the right person here.
Oh, I'm sorry. So I believe that
the ratepayer funds discussed here are still
from our GRC; right?
Yeah they're still from our GRC.
The --
ALJ BUSHEY: Wait a minute. What do
you mean from your GRC?
MS. SALUSTRO: We have a authorized
revenue requirement from our 2012 GRC for
SONGS costs.
ALJ BUSHEY: Okay. So these
decommissioning costs are a line item in your
revenue requirement?
MS. SALUSTRO: They -- the SONGS costs
is a better way to describe them.
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ALJ BUSHEY: SONGS costs?
MS. SALUSTRO: Yes.
ALJ BUSHEY: And because you didn't
have a decommissioning agreement, these early
decommissioning costs were rolled into
generic SONGS costs?
MS. SALUSTRO: When we -- our
application for the 2012 GRC requested a
revenue requirement for SONGS costs as we had
always done. That was before -- that
proceeding was going on prior to and then
during shutdown. So our request remained the
same, and it was approved. And so we had a
revenue requirement for SONGS costs through
the 2012 GRC Decision.
Some of those costs are
decommissioning costs granted. And so when
we received the approval to reach trust funds
to pay for those costs through the advice
letter process, which was just recently
approved, the advice letter lays out how
those funds are then given back to ratepayers
in order to make everything whole for the
ratepayer.
ALJ BUSHEY: Okay. So you're going to
take money out of the decommissioning trust
and sort of pay back revenue requirement, if
you will? Or it will be a credit in a
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balancing account somewhere?
MS. SALUSTRO: I believe that's right.
We have Norma Jasso up next. She might be
able to describe this better than I can.
ALJ BUSHEY: I just want to make sure
there isn't any double-counting.
MS. SALUSTRO: No, no, no. We were
very careful not to engage in double
counting.
ALJ BUSHEY: That was my only question.
Final questions for the witness?
Hearing none --
Mr. Matthews.
MR. MATTHEWS: If I could briefly add
to what Ms. Salustro explained?
The ratemaking treatment is
addressed in the SONGS OII settlement. And
at least the way it works for SCE, there is a
-- there is a refund mechanism through our
ERRA of any costs that are deemed to be
decommissioning costs.
ALJ BUSHEY: Okay. Thank you I guess
for that testimony. So the witness then is
excused.
We're going to take a brisk break
until exactly 11:00 o'clock.
We'll be off the record.
(Off the record.)
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ALJ BUSHEY: The Commission will come
to order.
Ms. Salustro would you like to call
your next witness?
MS. SALUSTRO: Yes. SDG&E calls Norma
Jasso.
NORMA G. JASSO, called as a witnessby San Diego Gas and Electric Company,having been sworn, testified asfollows:
THE WITNESS: Yes.
ALJ BUSHEY: Please be seated.
State your full name for the record
and spell your last name.
THE WITNESS: Norma G. Jasso,
J-a-s-s-o.
ALJ BUSHEY: Ms. Salustro.
MS. SALUSTRO: Thank you.
DIRECT EXAMINATION
BY MS. SALUSTRO:
Q Ms. Jasso, do you have Exhibits 20
and 21 in front of you?
A I do.
Q And you're sponsoring sections as
indicated in the table of contents within
both of these exhibits; correct?
A Correct.
Q Were these sections prepared by you
or under your supervision?
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A Yes.
Q Do you have any changes or
corrections to make at this time?
A I do.
Q Could you please direct us to your
particular change or correction?
A In Exhibit 21, on page 11, line 3,
I'm adding two words,
"decommissioning-eligible." And I will read
the sentence how it reads right now and then
the revised sentence.
"SDG&E will cease recording entries
in the SONGSBA for costs incurred on or after
January 1st, 2015."
The new sentence will read, "SDG&E
will cease recording entries in the SONGSBA
for decommissioning-eligible costs incurred
on or after January 1st, 2015."
Q Do you have any additional
corrections to make at this time?
A No.
Q With this correction, to the extent
that these documents contain facts, are those
facts true and correct to the best of your
knowledge, information, and belief?
A Yes.
Q And to the extent these documents
contain opinions, do those opinions
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constitute your best professional judgment?
A Yes.
Q Do you adopt these exhibits as your
sworn testimony in this proceeding?
A I do.
MS. SALUSTRO: Thank you.
Your Honor, the witness is available
for cross-examination.
ALJ BUSHEY: Thank you.
Mr. Lee.
MR. LEE: Thank you, your Honor.
CROSS-EXAMINATION
BY MR. LEE:
Q Good morning, Ms. Jasso.
A Good morning.
Q Ms. Jasso, I wasn't quite following
your correction because I was looking at
Exhibit 20. I direct your attention to
Exhibit 20.
A No, Exhibit 21.
ALJ BUSHEY: Good. Because that's
where I made the correction.
MR. LEE: Oh, Exhibit 21. I'm sorry.
Q And Exhibit 21 is labeled
SDG&E-02-R-E-A?
A Yes.
Q Thank you.
And your correction was on page 10?
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A Would you like me to repeat it?
Q Yes, please.
A Yes, on page 11.
Q Page 11, yes.
A Line 3.
Q Yes.
A I will add two words. It currently
reads, "SDG&E will cease recording entries in
the SONGSBA for costs incurred on or after
January 1st, 2015." In front of the word
"costs" I'm adding
"decommissioning-eligible."
Q Thank you. Thank you.
Ms. Jasso, your job title is
Regulatory Accounts Analyst Manager; is that
correct?
A Regulatory Accounts Analysis
Manager.
Q Thank you. What are your job
responsibilities with regard to maintaining
the SONGSBA balancing account? Did you
understand the question?
A Could you be --
Q Certainly.
Ms. Jasso, as part of your job
duties, are you responsible for maintaining
the SONGS -- not the -- the SONGSBA,
S-O-N-G-S-B-A, SONGSBA balancing account?
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Are you responsible for maintaining that
balancing account?
A So with the word "maintaining," I
don't know if you mean accounting journal
entries or what specifically you mean by
maintaining. I don't do accounting journal
entries, but I am responsible for compliance
with the mechanism for the SONGSBA.
Q Thank you.
Now, when you say you are
responsible for compliance, does that include
a responsibility to see that the SONGSBA
balancing account is in compliance with
Commission orders?
A Yes.
Q And how long have you had this as
part of your job responsibility?
A I have had this position for two
years.
Q So your responsibility as described
regarding SONGSBA began in 2013?
A Yes.
Q I direct your attention now to
Exhibit 20, Ms. Jasso. Page 16, lines 8
through 11.
A I'm there.
Q What do you mean on line 9 when you
say that the costs in the SONGSBA balancing
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account are, quote, "generally related"?
What does that mean, "generally related"?
A In my testimony, I included on the
same page -- if you go to line 23, I've
included what we are currently recording in
SONGSBA.
Q Uh-huh.
A And so when I said generally
related is because I have four bullets here.
Q Uh-huh.
A And generally those are related to
the events which occurred prior to June 2013.
Q And so the activities on page 16,
lines 23 to 31 and then going on to page 17
are the activities that are recorded in
SONGSBA?
A Yes, these are the activities.
Q Thank you.
Now, I turn your attention to
Exhibit 21, page 10.
A I'm there.
Q At lines 20 to 22.
A Yes.
Q That information indicates to me
that the Commission ordered SCE to maintain
the SONGSBA balancing account open to support
its application for reasonableness regarding
costs incurred for 2014; is that correct?
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A In this Decision that I mention on
lines 20 -- starting on line 20, the
Commission ordered SDG&E to retain the
SONGSBA open until the Commission directs us
to close it.
Q Thank you. Now, since the date of
that Decision, D -- excuse me -- D.14-11-040,
has the Commission issued an order directing
SCE -- SDG&E to close the SONGSBA balancing
account? ]
A No.
Q Thank you. Now, I direct your
attention to Exhibit 21, page 11.
A I'm there.
Q Thank you. Lines 3 to 4.
A Yes.
Q You use terms -- well, I direct
your attention to the term "will cease
recording entries." And would you also look
at the term "for costs incurred"?
A Yes.
Q Those are two different events, are
they not, recording and when costs are
incurred?
Let me ask you your definition.
What do you understand when you say costs
incurred? When are costs incurred?
A Cost, for the SONGS for the costs
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are incurred when we are -- when we
receive -- in our case when we receive the
information, the details of the cost from
Edison, then we record them. So if we
receive them, we stop, we record them, and we
consider them incurred at that time.
Q And normally when costs are
received and hence incurred, do you also
record them at the same time? I mean do
those two events take place normally on the
same day?
A In the same accounting period, yes.
Q Okay. Is there any time lag
between when you receive the details of a
cost and when you subsequently record the
costs in the SONGSBA balancing account?
A No.
Q Okay. So they generally would
happen on the day when you receive sufficient
details to say that the costs incurred, and
then you would promptly record it in the
SONGSBA balancing account?
A Yes.
Q Thank you. What are you going to
do with the costs that are incurred
subsequent to January 1st, 2015, and recorded
after January 1st, 2015?
Let me rephrase my question. I may
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have been mixing my dates.
You state on lines 3-4, page 11,
Exhibit 21, that SDG&E will stop recording
entries for SONGSBA regarding costs incurred
on or after January 1st, 2015?
MS. SALUSTRO: Your Honor, this was the
one correction that Ms. Jasso had. So the
sentence is actually that we'll stop
recording entries in the SONGSBA for
decommissioning eligible costs.
ALJ BUSHEY: Right. That was the
correction.
MR. LEE: Thank you. I stand
corrected.
Q So my question again, if you're
going to stop recording these decommissioning
eligible costs that are incurred after
January 1st, 2015, what happens to them?
A Yes. On that same page in my
testimony, page 11.
Q Yes.
A As we continue reading after that
sentence that we've been discussing, I do
explain that we are using the SONGS 2 and 3
Permanent Closure Non-Investment-Related
Expense Memorandum Account, otherwise known
as SPCEMA. That's the account where we are
recording the decommissioning eligible cost.
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Q Now, I asked you a question about
the ineligible decommissioning costs that are
incurred and recorded in the SONGSBA
balancing account after January 1st, 2015.
What are you going to do with those
ineligible decommissioning costs?
A So the cost that will not go into
SPCEMA will go into SONGSBA.
Q I understand. So you only stop
using SONGSBA for decommissioning eligible
costs but not for ineligible decommissioning
costs?
A We're stopping for decommissioning
cost, yes.
Q Eligible costs?
A Yes.
Q But you're still using the SONGSBA
balancing account for ineligible
decommissioning costs?
A I am using SONGSBA for costs that
are not decommissioning eligible.
Q Thank you. Yes. I hope we're
saying the same thing. Thank you.
Is there at all a possibility that
a cost, a noneligible, decommissioning
noneligible cost, could be incurred before
January -- strike the question. I think I
understand. Thank you.
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Now, I'd like to ask you to explain
something that appeared at first to me
inconsistent. On Exhibit 20 at page 16,
lines 8 through 9, you stated, continues to
record nondecommissioning cost in SONGSBA,
and then in Exhibit 21 at line 11 lines 3 to
4 you say it will cease recording entries in
SONGSBA for decommissioning eligible costs?
A Right.
Q So maybe in light of this
correction they're not inconsistent, are
they?
A Correct. That's why I made the
correction.
MR. LEE: Thank you, Ms. Jasso. You
saved me a lot of time. End of
cross-examination. Thank you.
ALJ BUSHEY: You've completed
cross-examination?
MR. LEE: I did. Thank you.
ALJ BUSHEY: Thank you.
Redirect?
MS. SALUSTRO: No thank you.
ALJ BUSHEY: Witness is excused.
Ms. Salustro, would you like to call
your next witness?
MS. SALUSTRO: Yes. Thank you.
Your Honor, SDG&E calls Randy Rose.
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RANDALL G. ROSE, called as a witnessby San Diego Gas and Electric Company,having been sworn, testified asfollows:
ALJ BUSHEY: Please be seated. State
your full name for the record and spell your
last name.
THE WITNESS: My name is Randall G.
Rose, R-o-s-e like a flower.
ALJ BUSHEY: Ms. Salustro.
MS. SALUSTRO: Thank you.
DIRECT EXAMINATION
BY MS. SALUSTRO:
Q Mr. Rose, you have Exhibits 20 and
21 in front of you?
A I have Exhibits 18 and 19. I don't
have 20 and 21, at least what I've numbered
as 18 and 19.
MS. SALUSTRO: Your Honor, may I
approach and make sure he has the right?
ALJ BUSHEY: We'll go of the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Ms. Salustro.
MS. SALUSTRO: Yes. Thank you.
Q So Mr. Rose, this time do you have
Exhibits 20 and 21 in front of you?
A I do.
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Q Thank. And you're sponsoring
sections as indicated in the table of
contents in both of these exhibits, correct?
A That's correct.
Q Were these sections prepared by you
or under your supervision?
A Yes.
Q Do you have any additional changes
or corrections to make at this time?
A I don't.
Q To the extent that these documents
contain facts, are those facts true and
correct to the best of your information,
knowledge, and belief?
A Yes.
Q And to the extent that these
documents contain opinions, do those opinions
constitute your best professional judgment?
A Yes.
Q Do you adopt these exhibits as your
sworn testimony in this proceeding?
A Yes.
MS. SALUSTRO: Your Honor, Mr. Rose is
available for cross-examination.
ALJ BUSHEY: Thank you.
Mr. Freedman.
MR. FREEDMAN: Yes, your Honor. I have
two cross exhibits to distribute.
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ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record we
identified Exhibit 27, which is a TURN data
request and SDG&E response. It's Question 1,
2, 11.
(Exhibit No. 27 was marked foridentification.)
ALJ BUSHEY: Exhibit 28 is TURN
cross-examination exhibit. It is also a TURN
data request and an SDG&E response. It is
Question 8 and its associated response.
(Exhibit No. 28 was marked foridentification.)
ALJ BUSHEY: So those are Exhibits 27
and 28.
Mr. Freedman.
MR. FREEDMAN: Thank you.
CROSS-EXAMINATION
BY MR. FREEDMAN:
Q Good morning, Mr. Rose.
A Good morning.
Q I'd like to ask you to turn to your
rebuttal testimony, which I believe is
Exhibit 20, page 14. Page 13.
A Page 13? Okay.
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Q And at the bottom of page 12
carrying over to page 13 you reference IRS
Section 468A(e)(4). And you state that the
IRS code limits the use of funds in qualified
nuclear decommissioning trusts to the three
purposes that you quote from the IRS
regulations on the next page; is that right?
A That's right.
Q Does the IRS also allow for the
termination of a nuclear, of a qualified
nuclear decommissioning trust fund upon
substantial completion of decommissioning?
A You could request a private letter
ruling from the IRS.
Q I'm asking a different question,
Mr. Rose.
A Okay.
Q There is a point where a qualified
nuclear decommissioning trust fund is
ultimately terminated?
A Yes.
Q Isn't that right?
A Yes.
Q And the IRS rules do provide for
that occurrence, do they not?
A Yes. That's in the regulation.
Q And what happens at that point to
any unspent balances that are no longer
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needed for decommissioning at the point that
the qualified trust is terminated?
A The assumption is those funds are
withdrawn from the trust.
Q And what is the IRS treatment of
that withdrawal? How do they --
A They tax it.
Q So the withdrawals are taxed?
A Yes.
Q Are withdrawals taxed when they are
taken from the fund at all times?
A They are generally -- yes. I think
at all times. There's a certain symmetry in
the tax code. The taxpayer gets a deduction
when they contribute funds to the
decommissioning trust. And so when funds are
withdrawn from the trust, they have to take
that into income.
Q So when SDG&E currently receives a
disbursement from the trust, that's
considered taxable income?
A Yes. And then there's an equal and
offsetting deduction for the underlying
decommissioning cost.
Q But the deduction is due to costs
being incurred. It's not related to the
disbursement mechanism itself, is it?
A That's correct.
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Q And so when a disbursement occurs
at the end of the trust's life, that
disbursement is similarly taxed; am I right?
A That's correct.
Q But there may be no offsetting
expense in that year to effectively
neutralize the tax impact; am I correct?
A That's right. That deduction that
would neutralize that impact occurred when
the contribution was originally made to the
trust.
Q And there's no penalty at the end
of the life of the trust when it's finally
terminated, is there?
A No. The only penalty specified in
the internal revenue code are for acts of
self-dealing.
Q And what is an act of self-dealing
at a general level? What does that mean?
A Well, that's where a disqualified
person would engage in transactions with the
fund.
Q So that's effectively the taxpayer
raiding the fund for their personal benefit?
A Yes. I mean that's one way to put
it, yes.
Q Acts of bad faith, would that be a
way to understand it?
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A Yeah. If there was an act -- if
for example, the corporation used the trust
funds for some purpose that benefited the
corporation, the IRS would deem that as a --
as an act of self-dealing. There would be an
excise tax or a penalty. And if they didn't
correct it, then the fund would be deemed
disqualified.
Q Okay. Thank you. On page 13 of
your testimony on line 15 you reference
private letter rulings that are sought from
time to time from the IRS. Have you been
involved in requests for private letter
rulings on behalf of SDG&E?
A I have.
Q Okay. Well, let's take a look at
the first cross-examination exhibit, which
has been marked Exhibit 27. And there's a
couple of responses here I'd like to just
walk you through. Have you seen these
responses previously or were you the author
of them?
A I've seen them and authored them.
Q Great. And in answer to Question 1
there's a question about whether a nuclear
decommissioning trust fund has lost qualified
status during the course of nuclear power
plant decommissioning. And am I correct in
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understanding your response is that you're
unaware of any instance where such a trust
has lost its qualified status during
decommissioning?
A Yes. With that caveat, during
decommissioning.
Q Right. And you state that the
consequences are so severe that a responsible
company would correct a violation prior to
disqualification.
What are the consequences of
disqualification?
A The market value of the funds
remaining in the trust become immediately
taxable.
Q And there would not be sufficient
offsetting expenses in that year to
neutralize the tax impact; is that right?
A That's correct.
Q So it's just, it all becomes
taxable at one time?
A That's right.
Q Okay. And going to page -- the
second page of this exhibit, there are
questions about transfers and IRS approval
for transfers between two qualified trust
funds. And here you explain that through a
private letter ruling companies may request
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IRS authorization to move funds between
qualified trusts; is that right?
A Yes. A company could request the
IRS permission to transfer between funds, but
doing so would be asking the IRS to, is it
okay if we violate the regulations, because
the regulations are quite proscriptive about
what the funds can be used for.
Q If the money is being moved from
one trust to another to pay for
decommissioning expenses, you're saying that
that would violate the trust, the
requirements of the IRS code?
A Yes. That would be my opinion.
Q And is that something that's backed
up by any particular rulings that you've
read?
A Yes. Code Section 468A broadly
defines the terms of a nuclear
decommissioning trust. In other words, a
nuclear -- a qualified nuclear
decommissioning trust is a creation of the
Internal Revenue Code, and specifically
Section 468A. And that lays out the broad
concepts. Then the regulations under 468A
define specifically what you can do in terms
of putting money into a trust and what you
can do in terms of taking money out of the
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trust.
And let me see if I've got it here.
If I were to go to the regulations,
specifically regulation 1.468A-5, it says in
Section 1 1 little i -- here's what it says.
An electing taxpayer can maintain only one
nuclear decommissioning fund for each nuclear
power plant with respect to which the
taxpayer elects the application of 468A. So
what it's saying is that you can set up one
qualified fund for each power plant. And
referring back to plant, in the code section
it says plant or unit thereof. So in terms
of SONGS we have three power plants, Units 1,
Unit 2, and Unit 3. Then over in section --
ALJ BUSHEY: I'm sorry. We'll be off
the record for a minute.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
THE WITNESS: In Section 3 of that
regulation which is entitled Limitation on
Use of Fund it says:
The assets of the nuclear
decommissioning fund are said to
be used -- are to be used
exclusively to satisfy in whole
or in part the liability of the
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electing taxpayer for
decommissioning costs of the
nuclear power plant to which the
nuclear decommissioning fund
relates.
So in my opinion that would
preclude the company from transferring funds
from one fund to the other fund because it
doesn't relate to the same unit or power
plant.
MR. FREEDMAN: Q And if the taxpayer
were to create a new trust for the same unit
and transfer money from the old trust to the
new trust and extinguish the old trust at the
moment of the transfer, wouldn't there still
be one, only one trust attached to that unit?
A There would only be one trust in
existence at the time.
Q And do you know whether the IRS has
issued any rulings relating to that type of a
transfer for an individual unit?
A Not to my knowledge.
Q Let's move to the next page in the
data response here, Question 11. SDG&E is
asked to provide copies of any communications
with the Internal Revenue Service regarding
nuclear decommissioning trust funds since the
shutdown of San Onofre in 2013.
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And in response, several documents
are provided. I have only attached one, and
that relates to a request by SDG&E that
received a private letter ruling, I believe
138136-14. Do you see that?
A Yes. Yes.
Q And in this request am I correct in
understanding that SDG&E sought a private
letter ruling regarding the permissibility of
using nuclear decommissioning trust funds to
pay for the costs associated with spent fuel
storage at an independent spent fuel storage
facility in Morris, Illinois, that stores
fuels from the SONGS Unit 1?
A That's correct.
Q And in response did the IRS raise
concerns about whether these were
reimbursable from the trust funds?
A Yes. I think to give context to my
answer you need to understand exactly how
these private letter rulings work. A
taxpayer if he has questions about whether
funds can be withdrawn from the trust and
still meet the provisions of Code Section
468A may request a private letter ruling from
the IRS. The IRS will inform the taxpayer if
it intends to rule adversely on the request.
And that's what happened in this
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situation. The IRS said, "Yeah, we have
concerns based on the facts and the law. We
plan to rule adversely." And our response
was, "Can we come back and meet with you and
try and talk you out of it," and which we
did. And ultimately what the IRS came back
with was a no ruling letter which said,
"We're not sure that we're the right branch
of the IRS to be dealing with the issues that
you have asked us to opine on. And so what
we're going to do is allow you to withdraw
your request and resubmit it to another
branch that's better qualified to rule on
your issue. If you get a positive ruling on
that specific issue, then we'll allow you to
come back to us and see whether or not we
agree with you on the other issues that were
in the ruling request."
Q And what has SDG&E done subsequent
to that conversation?
A Mull it over and think about how we
want to respond to the IRS.
Q Understood. But notwithstanding
the ultimate resolution of this issue, which
I understand is pending, is it fair to say
that the concern identified in this private
letter ruling related to whether funds could
be reimbursed if there was also a likelihood
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that they could be obtained from another
source, namely, through litigation against
the United States Government?
A That was one of the concerns
expressed by the IRS. And that was the
concern that they agreed with us that they
did not have expertise to rule on.
Q So at this point it's unresolved
whether SDG&E can withdraw money from the
trusts that relate to costs for spent fuel
management that may also be included in a
damage claim against the United States
Government?
A That's right. They haven't ruled
against us, and yet they haven't said that
those are decommissioning costs.
Q And does part of the issue hinge
upon the likelihood of recovery?
A Well, that was our argument with
the IRS because what happened is they were
applying to standard that exists in a
particular code section that deals with
abandonment losses. And for example, this is
really a good example, with respect to SONGS,
we know that there's -- the SONGS was shut
down because of the failure of the steam
generator replacements. We have an action as
does Edison against the manufacturer of those
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steam generators.
While we're waiting for that
proceeding to conclude, we're not eligible to
take an abandonment loss under the Internal
Revenue Code. And that's Section 165. Our
argument to the IRS is, this isn't a 165
issue. This is a 162 issue. Storage of
spent nuclear fuel costs are an ordinary and
necessary business expense. They're not an
abandonment loss. So therefore, you're
applying a standard that exists in a code
section that is irrelevant to our request.
And then they said, "Gee, I think
maybe you have something there. We're not
really experts in that area. Why don't you
resubmit your request to somebody else in the
IRS that is more expert in that particular
code section."
Q And this is obviously an issue, is
it not, that pertains to a large number of
utilities facing similar facts?
A I don't know how many utilities
have the specific facts that we do because
this deals specifically with off-site storage
at this Morris facility in Illinois. And I
don't know how many companies store spent
nuclear fuel at that facility.
Q I'm actually asking about a
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different issue that's identified there which
has to do with this single issue of recovery
of whether disbursements can occur for costs
that have a likelihood of recovery and to the
extent that's applicable to SONGS Units 2 and
3?
A That could be an issue that a
number of companies face depending on their
facts and circumstances.
Q Well, if it turns out that the IRS
does not bend on this issue and confirms the
earlier ruling that we've reviewed here, what
would happen to funds that have already been
collected and deposited into the trust funds
and that are expected to be used for this
purpose?
MS. SALUSTRO: Objection.
Mischaracterizes. There's no ruling from the
IRS, as Mr. Rose has explained.
MR. FREEDMAN: If the IRS rules --
THE WITNESS: The IRS issued a no
ruling. So they didn't actually rule.
But I think to get to your question,
what we were asking for is to be able to
withdraw funds from the trust to pay for
these spent nuclear fuel storage costs.
Currently through 2015 those spent nuclear
fuel costs are in the revenue requirement in
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a general rate case. They're not part of the
nuclear decommissioning trust.
MR. FREEDMAN: Q I guess my question
is, and I understand the IRS resolution has
not yet been complete and it may go different
ways, but I'm asking you to envision a
situation in which the IRS rules adversely on
this issue against SDG&E. Now, in that
situation does that mean that any money in
the trust funds that had been assumed to be
available for use for this purpose could not
be withdrawn for any purpose?
MS. SALUSTRO: Objection, your Honor.
Not only is it compound and vague, but it
also again misstates that there's some type
of subsequent ruling expected by the IRS. As
Mr. Rose explained, we received a no ruling.
We have not submitted or asked for an
additional ruling from the IRS at this point.
So there's nothing to indicate that the IRS
will speak further on this particular issue.
ALJ BUSHEY: Well, if that happens,
then what's the plan, right? Isn't that the
question?
MR. FREEDMAN: Yes, your Honor.
ALJ BUSHEY: So it's sort of, it's
almost what is the status quo? If the status
quo continues, if there's no change, what is
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SDG&E's plan for the costs associated with
that offsite storage?
MR. FREEDMAN: Your Honor, my question
pertains to the onsite storage at Units 2 and
3. The issue that's raised in this private
letter ruling. There are different issues.
The one I'm interested is the onsite.
ALJ BUSHEY: The onsite. Okay.
THE WITNESS: Okay. This deals solely
with the offsite storage, not the onsite
storage. So there are two different issues.
The IRS has never given us an indication that
they would disapprove of decommissioning
costs for onsite storage. They seem to draw
a distinction between offsite and onsite
storage costs and whether or not they're
decommissioning costs.
MR. FREEDMAN: Q Mr. Rose, with all
due respect, the first issue presented in the
letter here that was presented, if you look
at the second paragraph of the first page,
about halfway down it states, the first issue
presented is your request, and your request
is primarily factual because of the requested
ruling would require a determination of the
likelihood of recovery of all or a portion of
the payments in question from the Department
of Energy. If a taxpayer has a right to
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recover such amount, they are not otherwise
deductible and are thus not nuclear
decommissioning costs.
A Okay.
Q So is this kind of a separate
issue --
A It is.
Q -- that is teed up?
A It's a separate issue. There's
really two questions going on here. First of
all, in order for you to treat a cost as a
decommissioning cost, it has to be deductible
for federal income tax purposes. So there
were a couple of questions presented, and one
is whether storage costs at all were
decommissioning costs. ]
And we were limiting our request to
the IRS specifically to offsite storage. But
with respect to onsite or offsite storage,
whether or not you had a right to collect
from the IRS -- that would be nice. If you
have a right to collect from DOE, then
there's a question about whether you can
deduct the spent fuel storage costs as long
as you had a right to deduct. That was our
whole case with the IRS because we do not
have a right. We have a right to file a suit
in hopes of collecting, but we don't have a
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fixed right.
Q So just to follow on then with what
the judge was -- was asking, what would be
the alternative strategy if the IRS rules
adversely or does not permit in any form
SDG&E to remove money from the trusts for
spent fuel management that may be sought from
the U.S. Government?
A Well, my understanding is that in
the past, those costs have been recovered in
the general rate case. If we couldn't
recover those costs through the trust, we'd
have to seek recovery from ratepayers.
Q Okay. Thank you. Let me ask you
about the next exhibit, which has been marked
as TURN-28. And this -- this response asks
questions about the nuclear decommissioning
trust committees and the master trust
agreement. I understand you are not an
expert on the master trust agreement; is that
correct?
A You are correct.
Q So I'm not going to ask you to be
an expert about the trust agreement, but I
would like to turn your attention to the
response to Question 8B, which includes an
excerpt from the trust agreement. And in
particular, I just want to draw your
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attention to the first few sentences which
describe the master trust agreement
description of how SDG&E may file an
application prior to the end of
decommissioning for final disbursements from
the trust. Do you see that?
A You want to go ahead and read the
section you're referring to?
Q Sure.
The company shall apply for and
acquire CPUC approval of the
estimated final costs for
decommissioning each plant or
plants. Such application shall
be made one year in advance of
the time the company estimates
use of funds exceeding 90 percent
of the forecast of
decommissioning costs approved by
the CPUC will be required. Upon
approval of the final cost of
decommissioning each plant, the
CPUC shall authorize final
disbursements from the applicable
funds to pay the decommissioning
costs.
A Okay. Thank you.
Q Are you familiar with this
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provision of the trust, or is this your first
time learning about it?
A This is my first time reading it.
Q Okay. So to the extent that SDG&E
were to file an application consistent with
this provision of the trust after 90 percent
of the funds have been expended, then the
return of those funds would be effectively
taxable, any remaining funds as we discussed
earlier consistent with the IRS code, would
they not?
A Yes, I believe they would be.
Q And when you read this paragraph,
do you see anything here that is inconsistent
with your understanding of the IRS
requirements governing qualified nuclear
decommissioning trust funds?
A I don't see anything inconsistent,
no.
MR. FREEDMAN: Okay. Great. Thank
you, Mr. Rose. That's all my questions.
ALJ BUSHEY: Redirect?
MS. SALUSTRO: None.
ALJ BUSHEY: Thank you. The witness is
not quite excused. I just have to follow-up,
on this one just to confirm that should there
be a recovery from the Department of Energy
and should costs have been included in
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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revenue requirements, the recovery from the
DOE will be credited to revenue requirement
as well?
THE WITNESS: Yes, yes, that's right.
You know, the real question that was being
asked here is whether we could take the
deduction and then if we get recovery, take
that back into taxable income so that there
again would be symmetry.
The IRS seemed to think that we
would need to wait until the final resolution
by the courts on whether DOE had to reimburse
us. And for whatever DOE didn't reimburse
us, then we could withdraw the remainder of
the trust.
ALJ BUSHEY: Right. We'll leave those
issues in the capable hands of the Internal
Revenue Service. And I'll be focused on
revenue requirement. Okay? Sounds good.
The witness is excused. Would you
like to call your next witness, Ms. Salustro?
MS. SALUSTRO: Your Honor, that
actually concludes SDG&E's witnesses at this
time.
ALJ BUSHEY: Yes. Mr. Freedman, hold
on.
We'll be off the record.
(Off the record.)
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ALJ BUSHEY: We'll be back on the
record.
Ms. Salustro.
MS. SALUSTRO: Thank you, your Honor.
Your Honor, there were several SDG&E
witnesses that did not appear during the
hearings because their presence had been
waived. They had sponsored various sections
of what's been marked as SDG&E exhibit -- or
marked as exhibits for identification ranging
from what's been marked Exhibit 18 through
Exhibit 24. So at this time SDG&E would --
moves for the admission of the entirety of
SDG&E's testimony, which is Exhibits 18
through 24 into the record.
ALJ BUSHEY: Does any party object?
(No response.)
ALJ BUSHEY: Hearing none, those
exhibits are received into evidentiary
record.
(Exhibit No. 18 was received intoevidence.)
(Exhibit No. 19 was received intoevidence.)
(Exhibit No. 20 was received intoevidence.)
(Exhibit No. 21 was received intoevidence.)
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(Exhibit No. 22 was received intoevidence.)
(Exhibit No. 23 was received intoevidence.)
(Exhibit No. 24 was received intoevidence.)
ALJ BUSHEY: We also have TURN
Cross-Examination Exhibits 25, 26, 27, and
28. Does any party object to having those
moved into the evidentiary record?
(No response.)
ALJ BUSHEY: Hearing none, then they
are received.
(Exhibit No. 25 was received intoevidence.)
(Exhibit No. 26 was received intoevidence.)
(Exhibit No. 27 was received intoevidence.)
(Exhibit No. 28 was received intoevidence.)
ALJ BUSHEY: That brings us to
Exhibit 29, which will be the ORA Report on
2014 SONGS Units 2 and 3 Decommissioning Cost
Estimate. That will be Exhibit 29.
(Exhibit No. 29 was marked foridentification.)
ALJ BUSHEY: And Exhibit 30 will be the
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Southern California Edison Company Responses
to ORA Data Request 1, Questions 10B, 12A,
and 12B.
(Exhibit No. 30 was marked foridentification.)
ALJ BUSHEY: I understand that all
parties have waived cross examination of the
ORA witnesses, so we will just receive these
documents into the record.
(Exhibit No. 29 was received intoevidence.)
(Exhibit No. 30 was received intoevidence.)
ALJ BUSHEY: That takes care of ORA's
exhibits and brings us to TURN.
Mr. Freedman.
MR. FREEDMAN: Yes, your Honor. TURN
would call to the stand our witness, Bruce
Lacy.
ALJ BUSHEY: Please come forward,
Mr. Lacy.
We'll get him sworn in, and then
we'll circulate the documents.
BRUCE A. LACY, called as a witnessby The Utility Reform Network, havingbeen sworn, testified as follows:
THE WITNESS: I do.
ALJ BUSHEY: Please be seated.
State your full name for the record
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and spell your last name.
THE WITNESS: I'm Bruce A. Lacy,
L-a-c-y.
ALJ BUSHEY: Thank you, Mr. Lacy.
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
identified Exhibit 31, which is Testimony of
Bruce Lacy on Behalf of The Utility Reform
Network Addressing Issues Related to the
Decommissioning Costs for the San Onofre
Nuclear Generating Station.
(Exhibit No. 31 was marked foridentification.)
ALJ BUSHEY: Mr. Freedman.
MR. FREEDMAN: Yes, your Honor.
Just for clarification, we had
submitted errata to the service list
approximately one week ago. The exhibit that
we have today is a clean version that
includes the errata. We are not asking for
those two versions to be separately marked.
ALJ BUSHEY: Thank you.
DIRECT EXAMINATION
BY MR. FREEDMAN:
Q Okay. Mr. Lacy, are you sponsoring
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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direct testimony that has been marked as
Exhibit 31, the Testimony of Bruce Lacy on
behalf of TURN.
A Yes.
Q And did you prepare -- was this
testimony prepared by you?
A Yes.
Q And do you have any corrections
that you wish to make at this time?
A Yes, I have two pages that I would
like to offer some small corrections on.
They do not change the conclusions or
recommendations of the report, but in the
spirit of precision on some of the numbers
being used in the proceeding, I'd like to
make those corrections.
The first correction is on page 2
of my testimony. And if we look at the
second paragraph, third line, it begins,
"Government begins removing." And it says,
"Government begins removing S and F from the
site in 2024." And that should be corrected
to say, "removing S and F from SONGS in
2024." The reason for the change there is
that the early years of fuel removal take
place from the Morris facility in Illinois
that we were just talking about, but that is
fuel that was produced by SONGS. So I just
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want to be very specific there.
The second correction that I wanted
to offer is on page 25 of 27, and there are
several here. But all of these corrections
relate to the exchange that took place
between Mr. Geesman and Mr. Levin. And I
will go to the fifth paragraph answer where
it says, "Changes to the U.S. Navy lease
conditions are a very real possibility."
Move down to the fourth line of that
paragraph. There's a number that says "441
million." I would like to change that to the
arithmetically proven result of Mr. Geesman
and Mr. Levin's discussion of "346."
And then going on down to the next
to the last paragraph that says, "In addition
to the specific amounts of 441 million,"
change that number to the arithmetically
correct "346 million."
And then in the next to the last
line of that paragraph, it says, "It is
important to note that these two numbers
alone represent a 10 percent reduction in the
overall project cost."
Those are my corrections. Thank
you.
Q And with those corrections,
Mr. Lacy, are the facts presented in your
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testimony true and correct to the best of
your knowledge?
A They are.
Q And do the opinions expressed in
your testimony represent your best
professional judgment?
A They do.
Q And do you adopt this testimony as
your own?
A I do.
MR. FREEDMAN: Thank you.
Your Honor, Mr. Lacy is available
for cross-examination.
ALJ BUSHEY: Thank you, Mr. Freedman.
Mr. Matthews?
CROSS-EXAMINATION
BY MR. MATTHEWS:
Q Hello. Good morning, Mr. Lacy. My
name is Walker Matthews, and I represent
Southern California Edison.
A Good morning. We just got that
good morning in by five minutes.
Q Sure enough.
I wanted to clarify the corrections
that you just made to your testimony. And
first take you to page 25 of 27 of what has
been marked as Exhibit 31. Are you on page
25?
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A Yes.
Q And you had changed the number from
441 million. I wanted to confirm whether you
had changed it to 346 million or 336 million.
I didn't quite hear it.
A If I spoke incorrectly, I
apologize, but I intended to say 346.
Q Okay. Thank you. I may have
misheard.
MR. MATTHEWS: Your Honor, can we go
off the record? I have two cross exhibits.
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
identified two exhibits. The first
cross-examination exhibit from Edison is an
Excerpt of the Report on Nuclear
Decommissioning dated February 28th, 2011.
This will be Exhibit 32.
(Exhibit No. 32 was marked foridentification.)
ALJ BUSHEY: And then Exhibit 33 is
Edison's cross exhibit, Excerpt from its
Nuclear Facilities Qualified CPUC
Decommissioning Master Trust Agreement.
That's Exhibit 33.
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Mr. Matthews?
(Exhibit No. 33 was marked foridentification.)
MR. MATTHEWS: Okay. Thank you.
Q Mr. Lacy, you participated in the
preparation of the February 28, 2011, Report
on Nuclear Decommissioning for the California
Public Utilities Commission; correct?
A Yes, I did.
Q And excerpts of that report have
been marked as Exhibit 32; is that correct?
A I assume the material you have
given me is correct. It looks familiar.
Q Okay. Thank you.
The conclusions contained in the
February 28th, 2011, report were unanimous
among the three preparers listed on the title
page of that report; correct?
A That's correct.
Q And you were one of the preparers
of that report; correct?
A That's correct.
Q The report considered among other
things differences between --
A Is there a page you would like me
to look at?
Q Not at this time. I'm still asking
general questions.
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A Okay.
Q The report considered among other
things the differences between the
decommissioning cost estimates for SONGS 2
and 3 and Diablo Canyon that were being
considered in the 2009 nuclear
decommissioning triennial proceeding;
correct?
A That's correct.
Q Okay. Please refer to page 14 of
the report, which is excerpted in Exhibit 32?
A I have page 14 here.
Q And it in the first paragraph
explains the panels', you know, consideration
of the two estimates. One of the differences
between the estimates identified by the panel
related to the quantity of material assumed
to be removed from the respective sites;
correct?
A Yes.
Q Now, as shown on the bottom of the
page -- or please confirm that what's shown
on the bottom of the page is the panel's
calculation of the difference between the
removal costs included in the SONGS 2 and 3
and Diablo Canyon estimates; is that right?
A Are you talking about the footnote
or the last paragraph?
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Q I'm referring to the last paragraph
on the bottom of page 14 of Exhibit 32.
A Sure. Okay. Let me just take a
look at this.
I've read that.
Q And the panel's calculation of that
difference was about 1.335 billion; correct?
A Yes, I think that's the sum of the
three numbers there.
Q And in fact, that's also confirmed
on page Roman 1, which is also excerpted in
Exhibit 33 -- excuse me, Exhibit 32.
A Can you tell me where you're
looking?
Q Page Roman 1, which is the
Executive Summary.
A Oh, I'm sorry. Okay.
Q It's the third paragraph. The
bottom of the third paragraph, you see the
1.335 figure?
A It's in the -- what you're talking
about is in the third paragraph near the end
of that paragraph?
Q Yes. Yes.
A Okay.
Q And that's the figure that the
panel calculated as the difference in removal
costs between the SONGS 2 and 3 and Diablo
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Canyon estimates considered in the 2009
nuclear decommissioning triennial proceeding;
correct?
A I want to be careful of the word
you used there. I want to go back and look
at page 14 for just a moment.
I -- I'd just be careful here. I
don't think I regard this -- in fact, I'm
confident that the 1.3 billion there is not
just material. I mean, there's a significant
indirect cost. And what's not shown in the
handout here is that we did a breakdown of
these additional costs. And. There's a pie
chart as I recall from the study. I have not
looked at it, but it details those additional
-- what those additional indirect costs are.
But I do agree that we identified a total gap
between the two of 1.3 billion.
Q Okay. Thank you for that
clarification.
The panel made this calculation
based on its understanding of the SONGS 2 and
3 and Diablo Canyon estimates being
considered in the 2009 nuclear
decommissioning triennial cost proceeding; is
that correct?
A Yes, I believe that's the basis for
the estimates used.
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Q Now, in the second paragraph on
page 14, the panel noted that the SONGS 2 and
3 decommissioning cost estimate did not
contain sufficient information to readily
determine the exact cost; is that correct?
A Yes, that's what it says.
Q So I want to understand the
recommendation that's at the bottom of page
14 of Exhibit 32, which was a recommendation
by the panel that a more accurate value be
determined for future NDCTP, nuclear
decommissioning cost triennial proceeding, by
developing a decommissioning cost estimate
specifically for the desired scope?
A I see those words.
Q Is it correct to say that the panel
was recommending that the California Public
Utilities Commission review and approve a
more accurate estimate of the SONGS 2 and 3
removal costs in a future proceeding?
A I believe that's what this intends.
Q Would you agree that this
proceeding is an opportunity for the
Commission to review a more accurate estimate
of the removal costs?
A I just want to make sure I
understand your question. Are you asking me
if I think the 2014 decommissioning cost
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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estimate is more accurate than the one we
looked at in 2009?
Q No. I'm asking you to confirm that
this proceeding is an opportunity for the
Commission to review an updated estimate as
recommended on the bottom of page 14.
A I believe the answer is yes.
Q If you could turn to page 19 of
Exhibit 32?
A I'm there.
Q The panel begins a discussion that
-- that compares SONGS 2 and 3, Diablo
Canyon, and Palo Verde decommissioning cost
estimates that were being considered in the
2009 nuclear decommissioning cost triennial
proceeding for other cost estimates for units
across the United States; correct?
A Yes, that's the beginning of the
first paragraph.
Q The panel also stated that "The
comparison also requires care to not
oversimplify and to not get lost in details."
Do you see that statement?
A I do. Those are my own words.
Q Do you still agree with that
statement as in relation to any comparisons
of the current 2014 SONGS 2 and 3
decommissioning cost estimate --
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A I do.
Q -- to other estimates?
A I do.
Q On the middle of page 19, the panel
further states that "An equally important and
challenging objective was to obtain
decommissioning cost estimates that are
reasonably current." Do you see that
statement?
A I do.
Q Do you still agree with that
statement in regard to comparing the current
2014 SONGS 2 and 3 decommissioning cost
estimate to other estimates?
A Yes.
Q You cite the estimated
decommissioning costs for St. Lucie in your
current testimony; is that correct?
A Yes.
Q The St. Lucie estimate cited in
your testimony refers to a 2010 estimate;
correct?
A Yes.
Q You also cite to a Turkey Point
estimate in your testimony?
A Yes.
Q The Turkey Point estimate cited in
your testimony refers to a 2010 estimate; is
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that right?
A What I'm going to do is look at the
-- what page are you looking at, just to make
sure that --
Q It's on page 23 of 27 of your
testimony, Mr. Lacy.
A Right. I don't believe the
testimony specified those dates, but I'm not
disputing the dates that you're offering
here.
Q You would agree to the dates
subject to check?
A Yes.
Q And would you also agree subject to
check that the South Texas Project cited in
your testimony refers to a 2012 estimate?
A I believe that's correct.
Q On page 23 of Exhibit 32, in the
first paragraph about midway through, the
panel also describes potential explanations
for variations in decommissioning cost
estimates considered in -- in this report;
correct?
A In the independent panel report?
Q Yes.
A Let me read that.
I've read that paragraph. Can you
remind me of your question, please?
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Q And the potential explanations for
variations include such things as the size of
the facilities, seismic design issues, and
other site and design factors; correct?
A Yes.
Q Do you still agree that those
potential variations are valid when
considering or comparing the 2014 SONGS 2 and
3 decommissioning cost estimate to other
decommissioning cost estimates?
A Yes.
Q St. Lucie is a smaller facility
than SONGS 2 and 3; correct?
A I -- it is smaller, but I don't
recall how much smaller it is.
Q Would you agree, with all other
things being equal, that a smaller facility
would tend to reduce the estimated
decommissioning cost for that facility?
A Yes.
Q SONGS 2 and 3 is located in a high
demand seismic area; correct?
A Yes.
Q Would you agree that, all things
being equal, a facility located in a high
seismic demand area would tend to result in a
higher decommissioning cost estimate than a
facility located in a lower seismic demand
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area?
A Yes. In the spirit of the
generalities that we've been speaking, I
would say yes.
Q Can you turn back to page 15 of
your report -- excuse me -- of the panel's
report, the independent report?
A Sure. I'm on page 15.
Q I'm looking at the third and fourth
paragraphs where there's a discussion of
SONGS security costs. Do you see that
discussion?
A I do.
Q Do you want to take an opportunity
to briefly review those two paragraphs?
A Sure.
I've read them. Thank you.
Q And on this page of the independent
panel report, the panel acknowledged that due
to SONGS location adjacent to a public Beach
and interstate highway, that SONGS security
requirements during decommissioning present a
number of challenges. ]
A I apologize. Where are you
reading?
Q I'm paraphrasing.
A Oh, okay. Thank you.
Q Would you agree with that
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paraphrasing?
A Yes. Basically a constrained site.
Q Would you also agree that the SONGS
security requirements and challenges may tend
to increase estimated decommissioning costs
when compared to other facilities?
A Again, in the spirit of the general
line, yes, but I think in security we
actually could get into a little more of a
detailed discussion there, but generally I'll
say yes.
Q You turn to page 3 of Exhibit 32.
A I'm on page 3.
Q At the bottom half of page 3 the
panel identifies a number of cost drivers.
Do you see that?
A Yes.
Q And these are cost drivers that
will impact the cost of decommissioning,
correct?
A Yes.
Q Do you still agree that these are
cost drivers that will impact SONGS 2 and 3
decommissioning?
A Well, let me take a look. I'm
assuming the answer will be yes, but let me
just look at it to make sure there's nothing
significantly changed. Yes. I would say
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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generally yes.
Q Okay. Mr. Lacy, can you please
turn to Exhibit 31, which is TURN's
testimony, Attachment B, which is in the back
of the testimony, and specifically turn your
attention to a TURN-SCE-2 Data Request
Question 1A, which provides the question and
SCE's response to Question 1A.
A Hold on.
ALJ BUSHEY: Mr. Matthews, is this
about account numbers?
MR. MATTHEWS: This particular set of
questions relates to the master trust
agreements where there's been some discussion
about the 90 percent threshold.
ALJ BUSHEY: Question 1A has to do with
account numbers.
MR. MATTHEWS: Are you --
ALJ BUSHEY: I'm in Attachment B.
MR. MATTHEWS: Q Are you at the back
where -- well, on the top of the page does it
say TURN-SCE-2, or does it say TURN SCE 1 in
the header?
A You said SCE-2 question what
number?
MR. MATTHEWS: Perhaps we can go off
the record briefly.
ALJ BUSHEY: We'll be off the record.
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(Off the record.)
ALJ BUSHEY: We will be back on the
record.
Mr. Matthews.
MR. MATTHEWS: Q Mr. Lacy, SCE's
response to Question 1A to Data Request Set
A.14-012-007 TURN-SCE-002 provides a response
to a data request that had been propounded by
TURN regarding the potential of return of
excess amounts from the trust funds.
Have you had an opportunity to
review SCE's response to Question 1A? And
I'm speaking in regard to the preparation of
your testimony.
A Well, I do believe I used this. In
fact, I think I referenced it in my
testimony, which I believe is why it's
attached as part of this packet to
Exhibit 31.
Q So the response was prepared by Dr.
Hunt, which is indicated at the top of the
page. Do you see that?
A Yes.
Q The response references the
90 percent -- I'll read the sentence. I'm
reading from the response, second paragraph.
The master trust agreements do
not contemplate any distribution
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of trust funds to ratepayers
prior to the payment of at least
90 percent of CPUC-approved
forecast decommissioning costs.
Do you see that?
A I do.
Q Do you understand that to mean that
prior to any refund of excess funds that at
least SCE's position is that the threshold
that must be reached is 90 percent spend of
CPUC-approved forecast?
A That's what I understand SCE is
saying in their current situation.
Q Thank you. I'd like to have you
please turn your attention to what's been
marked as Exhibit 33, which provides an
excerpt from SCE's nuclear facilities
qualified CPUC decommissioning master trust
agreement.
A I have Exhibit 33 here.
Q Now, I assume that you may have
never seen this page from SCE's master trust
agreement?
A I don't believe I have.
Q In paragraph 8, which discusses
final disbursements, there's a reference to a
90 percent threshold. Do you see that
figure?
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A I do.
Q Is the 90 percent figure shown here
consistent with the 90 percent that SCE has
offered as its understanding of the threshold
requirement prior to the refunding of excess
funds?
A Well, let me just take a moment and
see if I can look at both documents and see
if I can support what you are asking me to
support. Well, aside from some differences
in extraction of wording in the response to
the data request, it appears to me to be the
same. And the circumstances and condition
and so forth appears to me to be the same.
Q Okay. Mr. Lacy, do you have
Exhibit 28 in front of you?
A I do not.
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
Mr. Matthews.
MR. MATTHEWS: Q Mr. Lacy, can you
look at the bottom of the first page to
Exhibit 28, which provides SDG&E's response
to Question 8. I'm looking at Section B, and
there's a paragraph --
A I see that.
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Q -- provided there.
A Would you like me to read that?
Q Yes. To yourself. And then it
continues to the top of the next page.
A Yes. I've read that.
Q Is the language in paragraph 8 from
Exhibit 33 which provides an excerpt of SCE's
master trust agreement nearly identical to
the quotation provided on the bottom of
Exhibit 28 which provides a quotation from
San Diego's master trust agreement?
A If they're not identical, they're
certainly very similar.
MR. MATTHEWS: Thank you for your time,
Mr. Lacy. I have no further questions.
ALJ BUSHEY: Thank you.
THE WITNESS: Thank you.
ALJ BUSHEY: Ms. Salustro.
MS. SALUSTRO: Yes. Thank you.
CROSS-EXAMINATION
BY MS. SALUSTRO:
Q Mr. Lacy, if I could have you
return to Exhibit 31, your testimony, page
22.
A Just a moment.
Q Take your time.
A I have Exhibit 31. The page number
again, please?
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Q 22.
A I'm on page 22.
Q Starting on page 22 for several
pages you describe your proposal for -- or
your recommendation to establish a process
for the timely return of excess balances in
the nuclear -- in the decommissioning trust
fund; is that correct?
A That's correct.
Q How do you define excess in this
context?
A Well, I guess my thought is to not
try to be too complicated here. Excess
basically means that there are -- the trust
fund balance is greater than the need. And
that excess amount could be small. It could
be large.
Q Are you recommending that any time
there is any excess, which by your definition
would be a dollar more than the need, that
the Commission should consider returning the
funds, the trust funds to ratepayers at that
time?
A No. I think that would be a
ridiculous proposition, and I don't support
that.
Q I guess I'm confused exactly what
the recommendation is. Could you clarify
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what --
A The recommendation is that as I
look at the cost estimate comparison. And by
the way, let me just clarify. My comparison
here is not intended to be a precise
reconciliation between these other cost
estimates and the SONGS estimate as we
attempted in the independent panel report.
But again, looking at the magnitude
of the difference and identifying two
examples of areas where there may be possible
reduction in liability in the future, this
could result in some excess amount that's
meaningful, and you're going to ask me, what
do I mean by meaningful, but I think we're
talking about maybe something on the order of
a couple of hundred million dollars more or
less. And there are certainly circumstances
that have been talked about in the last two
days where that number might be even higher.
But the recommendation is to begin
work on a process on how the Commission would
approach that. And I think part of that
process would be some assessment of what
constitutes an excess amount, at what time
would it be appropriate for the Commission to
consider that. So beyond that, I'm offering
no recommendation other than that we begin
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working on a process to deal with this
potential issue.
Q A moment ago you said -- and I
tried to write it down, but I might have
gotten it wrong -- that there might be
possibly some reduction in liability in the
future. Is that essentially accurate?
A Yes.
Q But there's no definite reduction
in liability that you know of right now?
A I'm not suggesting there is, but
there's certainly examples of issues out
there where the liability could be reduced if
there were favorable actions that took place.
And those actions should they come about
could result in this opportunity for excess.
And it's very clear that returning any excess
will be involved with a lot of complicated
issues. And these complicated issues would
take time to prepare for. So anyway, long
answer to a short question. Thank you.
Q Mr. Lacy, would you agree that the
balance of the nuclear decommissioning trust
funds varies depending on the performance of
the different asset classes that the trust is
invested it?
A Yes. We just look at the earlier
part of this week.
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Q Yes. Indeed. And would you also
agree that the decommissioning period
specifically for SONGS is pretty extensive,
currently estimated to run until I believe
2052?
A Could you repeat your question,
please?
Q Sure. I'll rephrase it. Would you
agree that the SONGS decommissioning period
is currently estimated to run until 2052?
A Yes. That's the current 2014 cost
estimate.
Q And so that is approximately how
many years from now? I'm not very good at
math.
A Yeah. 37. Something like that.
Q 37 years?
A Over the period of time the nature
of that spending also changes significantly
too.
Q So you would agree that the
spending varies over time?
A Yes.
Q And would you also agree that the
decommissioning cost estimate is likely to
vary over time?
A Yes.
Q Mr. Lacy, I know a moment ago you
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said that the plants that you list on page 23
as a comparison to the SONGS 2 and 3 plants
are not supposed to be identical, identical
comparison?
A Yeah. I'm not attempting to
provide a precise reconciliation.
Q Would you agree that none of the
four plants here that you use as a comparison
have decommissioning -- have site restoration
costs that include removing building
structures more than 3 feet below the surface
or below grade?
A I think that's correct.
Q And would you also agree that among
these four plants that you have chosen as a
comparison, none of them includes site
restoration for removing conduits running
underground between the plant and the cooling
water supply intakes and outfalls?
A On that point I'd want to be more
careful. I mean I generally agree with the
thrust of your question, but all of these
plants are involved with large body of water
locations. There may be conduits at some of
the other sites, may be smaller. So I want
to be careful here, but I generally agree
with the thrust of your question.
Q Switching topics, if we could turn
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to page 25.
A Okay. I'm there.
Q I'm looking at the third paragraph
which starts with an A.
A I'm there.
Q And I'll just read exactly what's
written here.
A Please.
Q "The Commission should anticipate
the day when such claims will not be
considered speculative."
Is it correct to assume that by
claims here you're referring to the utility's
claims against the US Government for the
failure of the DOE to pick up spent fuel?
A Yes. And that's suggested in the
earlier paragraphs, I believe.
Q Thank you. What do you mean by the
day when such claims will not be considered
speculative? What do you mean by "not
considered speculative"?
A Well, I raised this issue in the
last nuclear decommissioning cost triennial
proceeding, and maybe we didn't use the word
speculative, but Judge Darling ordered that
it was, you know, still not a certainty that
we should assume that there will be a
continuing stream of these damage payments in
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the future. And that's what I'm referring to
here.
Q Do you have any additional
information since Judge Darling's ruling,
which I concur that was her finding, that
would lead you to believe that there is some
specific event on the horizon when these DOE
claims, litigation claims would no longer be
speculative?
A Well, I think the key event on the
horizon here that you and I are both -- would
need to look at would be a decision by the
California Commission.
Q And by California Commission, are
you referring to the PUC?
A California Public Utility
Commission. So.
Q I'm trying to understand your
answer. Are you saying that if the
California Public Utilities Commission
determines that DOE litigation success of
these claims is no longer speculative, then,
I guess it's roundabout, but then they'd no
longer be speculative?
A That's what I believe.
Q Are you asking the Commission today
to find that -- or in this proceeding to find
that DOE litigation claims are no longer
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speculative --
A No.
Q -- in their success?
A No. I just offer this, that this
is an important issue ahead of us. There's
this opportunity.
Q Are you, Mr. Lacy, aware of
Edison's current claims pending before the
courts against the DOE?
A Yes. I think that's been the
subject of some data requests, and I think
it's been discussed in some of the earlier
testimony in this proceeding.
Q And to the best of your knowledge,
those claims continue to be litigated?
A That's correct.
Q Mr. Lacy, just to return briefly to
the idea of the excess funds and your
recommendation for a plan, you're not today
stating that you believe that there are
excess funds in Units 2 and 3 that should be
returned to ratepayers, are you?
A Yeah. I think I understand your
question clearly, and the answer is no, I'm
not suggesting that there are excess funds
today. If I thought there were excess funds
today, I would have challenged the cost
estimate.
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Q Mr. Lacy, in your profession you
are familiar with the post-shutdown
activities report or PSDAR NRC requirement,
correct?
A Yes. For you to file that report
with them.
Q Yes. And --
A Or Edison, actually, but yeah. The
operator on behalf of the owners.
Q Yes. And it's true, is it not,
that the PSDAR must be submitted to the NRC
inclusive of the decommissioning cost
estimate; is that correct?
A I think you're saying that it must
include the decommissioning cost estimate?
Q Yes.
A Yes, I believe I agree with that.
Q Are you aware that in September of
2012 Edison on behalf of the co-owners
submitted the PSDAR including the
decommissioning cost estimate to the NRC?
A I don't recall the precise date,
but I know that a PSDAR was submitted, and I
know it was submitted by Edison, and I know
it included a cost estimate. Now, if it was
submitted in 2012, did I --
Q I'm sorry. 2014.
A Okay. Thank you. Yes. I'm more
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comfortable with that date.
Q And are you aware that on August
20th, so just last week of 2015 NRC accepted
the PSDAR including the DCE for SONGS 2 and
3?
A I was not aware of that, but I'm
not surprised.
MS. SALUSTRO: Those are all my
questions.
ALJ BUSHEY: Thank you, Ms. Salustro.
Mr. Freedman. Oh, Mr. Geesman.
MR. GEESMAN: Thank you, your Honor.
CROSS-EXAMINATION
BY MR. GEESMAN:
Q Good afternoon, Mr. Lacy.
A Good afternoon.
Q John Geesman on behalf of the
Alliance for Nuclear Responsibility.
I'd like to go to the Exhibit 32,
which was one of those Edison
cross-examination exhibits Mr. Matthews used.
And on the very first page of Exhibit 32,
which appears to be the title page to the
independent panel report, could you explain
who the members of this independent panel
were and how they were selected?
A Yes. Some background on the
composition of the panel. As was suggested
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in some of the cross-examination earlier in
my time, during the course of the 2009
nuclear decommissioning triennial proceeding
the issue was raised about the significant
difference between the Diablo Canyon and the
San Onofre cost estimate. And various
questions and issues were discussed during
the course of the proceeding.
The result of all of that was the
formation of the panel. And so the
suggestion was the panel could be composed of
three people who had experience and knowledge
in the area of nuclear decommissioning. And
so three parties here. Nicholas Capik from
ABZ Corporation, he was a lead person in the
development of the nuclear cost estimate, the
cost estimate for San Onofre. Mr. Geoffrey
Griffiths of TLG Associates, and he had an
important role in the development of the
Diablo Canyon cost estimate. And I was asked
to be part of the panel also because of my
work with TURN and involvement in the
proceeding.
So basically we had two experts
from the industry who have substantial
background in decommissioning cost estimating
and myself who also has some background and
experience in the area and represented
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supposedly an independent or neutral
perspective.
Q This panel was established by a
Commission decision?
A Yes.
Q And your report was requested by a
Commission decision?
A I believe the answer to that is
correct.
Q If I go to Roman numeral i, which
is the first page of the executive summary,
still in Exhibit 32, I see in the second
paragraph the figure $3,659 million as the
2008 estimated cost to decommission the SONGS
site. Was that for SONGS Units 2 and 3?
A You know, at this point I don't
remember exactly, but I believe it was just
for Units 2 and 3.
Q Well, the sentence that leads off
the paragraph suggests that the subject of
the panel was 2 and 3. ]
A Right. I -- I mean the intent was
not to involve the SONGS 1.
Q And that's in 2008 dollars?
A Well, the -- probably, but with the
estimate in 2008, it might have been 2007
dollars. But it would certainly be 2007 or
2008. I don't remember at this point.
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Q Let me go down to the --
A It's not going to be anything other
than that.
Q Let me go down to the third
paragraph where you identify -- and
Mr. Matthews asked you about this -- the
$1,335 million number associated with the
Navy easement requirements. You say that's
in 2008 dollars?
A Oh, there it is. Yes. Thank you.
Q So both numbers are in 2008
dollars?
A Yes.
Q And would you accept my rough math
that 1.335 is a little more than 36 percent
of 3.659?
A Sure.
Q So if I turn to your testimony,
which has been marked as Exhibit 31, and I go
to page 25 of 27, you made the correction at
the beginning of your testimony that the
number you now associate with the Navy
easement is 346 million. That's in 2014
dollars; am I correct?
A Yes.
Q So in order to compare apples to
apples, I'd have to escalate this 1.3 billion
from 2008 dollars to 2014 dollars in order to
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make it a fair comparison with the 346
million?
A I disagree with that.
Q Okay. Could you -- could you
explain why?
A Yes. Setting aside the issue of
escalation, which I understand is an
important consideration, if one is trying to
do certain kinds of comparisons over time --
what I want to emphasize is again what I said
earlier in my testimony this year. My
purpose was not to do a precise
reconciliation between the SONGS estimate and
these other plants. My purpose was really
very simple.
It was to, number one, again,
illustrate the very large size of the SONGS
estimate compared to a body of other plants.
And number two, to provide a few examples of
where there may be opportunity in the future
for reduction in cost or liability. I'm
confident if Mr. Griffiths and Mr. Capik and
I spent two months going over the SONGS
estimate, that we would be able to come up
with a lot more detailed explanation of the
gap. And I believe it's possible that
additional elements of that might be related
to the Navy lease.
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But my purpose in my testimony was
to use a number that I could pluck out of the
study very easily, very quickly. This comes
right out of one of the periods just to
illustrate this is kind of a low end. You
might look at the independent panel as maybe
a high end. But again, I would not support
directly comparing these numbers. I used the
number to purely illustrate the possibility
that there may be future excess.
Q Okay. I will not directly compare
the two numbers. I'll compare the two
percentages.
A I would disagree with that also.
I'm sorry. Go ahead. I'm cutting you off.
I apologize.
Q In the independent panel's report,
the Navy lease was attributable for -- or
accounted for about 36-and-a-half percent of
the total decommissioning cost. In your
testimony today, you identify it as about
10 percent.
What accounts for that substantial
reduction in the proportion of total
decommissioning costs attributable to the
Navy easement requirements?
A Well, I'd go back to what I said
just a moment ago. The 1.3 billion was the
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result of two months worth of effort going
through on a detailed, fine-tooth comb basis
of the two estimates by myself and two other
experts in the industry. The number I
offered in my testimony that you're referring
to does not represent anything even close to
that kind of effort. So the numbers really
are apples and oranges.
Q You indicate again at page 25 about
mid way through the page, "Changes to the
U.S. Navy lease conditions are a very real
possibility." Why do you believe that?
A Very real possibility. Well,
there's a -- a lease with these -- as I
understand it from testimony in the last
day-and-a-half of some potentially ambiguous
aspects of the lease. We have Edison
actively engaged in a discussion with the
Navy, and I would be the first to say that
there's no guarantee of success.
But with an applied effort here, I
think there's a possibility of success. And
even if Edison is not fully successful in --
let's assume this 346 or whatever it is
represents a 100 percent version of success.
Even if they're only 50 percent successful,
then you're talking about -- what?
$180 million. I still believe $180 million
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is a meaningful number.
Q So you would regard altering the
Navy easement requirement as a good thing?
A From the point of view of being
able to return money to customers, I believe
it's a very good thing.
Q Then on page 9 of 27 of your
testimony, which is Exhibit 31, your very
first answer, second sentence, says, "The
large size of the project, over $4 billion,
decades long-time frames calls for elevated
attention by the Commission to ensure that
customers receive what they have paid for."
And then you go on, "completion of the
project," and so on.
Haven't Edison and San Diego's
customers since the trusts were established
in 1988 been paying for the complete removal
of subsurface structures on the Navy
easement?
A Well, I don't know about the
complete history, but I think that's a
reasonable assumption.
MR. GEESMAN: Thank you very much.
That's all I have, your Honor.
ALJ BUSHEY: Thank you, Mr. Geesman.
Redirect, Mr. Freedman?
MR. FREEDMAN: Thank you, your Honor.
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REDIRECT EXAMINATION
BY MR. FREEDMAN:
Q Mr. Lacy, you were just asked by
Mr. Geesman about the likelihood -- Mr. Lacy,
you were just asked by Mr. Geesman about the
likelihood of potential renegotiation of the
terms of the Navy lease. Do you recall that?
A Yes.
Q Are you suggesting that this
Commission should make any particular
assumption regarding the outcome of the
ongoing negotiations over the lease?
A No, other than that there's a
possibility that it might be favorable.
Q Are you suggesting that in the
event that there are changes in the lease
terms, that those would be relevant for
purposes of understanding the likelihood of
excess funds that could occur in the trust?
A Yes.
Q You were asked by counsel from
SDG&E about the PSDAR that was submitted to
the Nuclear Regulatory Commission. Are you
familiar with the PSDAR acceptance criteria
that the NRC applies?
A I might need my memory refreshed a
little bit on that, but generally.
Q Is it your understanding that the
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Nuclear Regulatory Commission reviews the
reasonableness of the cost estimate that is
presented as part of that process?
A I believe that's correct.
Q That is correct that what?
A That they do a review of the cost
estimate.
Q And do you know whether the cost
estimate there is consistent with what Edison
and SDG&E have presented in this proceeding?
A I believe it's the same.
Q You were asked about whether DOE
litigation claims are -- whether litigations
claims by the utilities against the U.S.
Government are speculative or are -- and you
were asked several questions about that. And
I wanted to know what's your assessment about
the likelihood that the utilities will
recover some damages from the United States
Government over the breach of the spent fuel
obligation?
A Experience to date suggests that
their success will be -- the probability of
their success is very high.
Q Could you say a little bit more
that would be the basis for your making that
claim?
A Well, every utility in the country
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who has filed a claim has been successful to
some degree. And in many cases, the level of
success has been significant. The legal
foundation for the claims has been
established. This has been through several
U.S. Courts of Appeals, so much of the claims
process at this point is item by item, line
by line claims rebutting DOE opposition to
those claims. And then the Court's ruling.
But the success rate overall has been quite
high.
Q Just to return to the question
about the Nuclear Regulatory Commission
review of the PSDAR for one moment. Is the
Nuclear Regulatory Commission concerned about
whether the cost estimate is too high?
A No.
Q Is their primary concern whether
there are -- the cost estimate satisfies a
minimum threshold for adequacy?
A Well, actually there are two
things. One is that the NRC has a formula
that they use for establishing a minimum
number. But the NRC uses the estimates
provided by the utilities. They put a lot of
reliance on that. And so they'll go through
and they have their staff. They will do an
independent calculation on the performance of
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the trust fund, and they basically forecast
these out and they say does the trust fund
balance exceed the current estimate. If it
does, they're happy.
Q But they're not making -- they're
not reviewing the estimate to determine
whether it is excessive, are they?
A No.
Q You were asked -- you were asked by
counsel from SDG&E about recommendations were
making for potential return of excess funds
in the future. Are you recommending that the
utilities in the coming years explore options
for the way in which excess funds could be
returned prior to 2052?
A I think -- yes, I think that's
another way of saying what I'm suggesting
here is provide a plan. This takes time to
think it through, develop options, figure out
what's reasonable. I'm sure many options
will require effort. It takes time to go
through all of that, but that's the purpose,
yes.
Q So your recommendation is based on
the assumption that there would be
substantial advanced planning required as
part of any such exercise?
A I think there is significant merit
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in having advanced time for planning.
Q You were asked by counsel from
Edison about the decommissioning cost
estimates for other plants that are contained
in your testimony and the dates of those
estimates being between 2010 and 2012.
Do the dates of those estimates --
are they relevant for the purposes for which
you included them in your testimony?
A Well, obviously a more current
estimate is more desirable than an older
estimate. But over the time period here, I
don't believe that's a significant factor in
the point I was trying to make.
Q You're not asking the Commission to
adopt some average of those other estimates
as the basis for finding Edison's estimate to
be unreasonable, are you?
A I am not.
MR. FREEDMAN: Great. Thank you.
Those are all my redirect questions.
ALJ BUSHEY: Final questions?
MS. SALUSTRO: Very limited.
ALJ BUSHEY: Very limited.
MS. SALUSTRO: Yeah. Thank you.
RECROSS-EXAMINATION
BY MS. SALUSTRO:
Q Mr. Lacy, back to the DOE
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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litigation damages. A moment ago you gave
your opinion that the utilities that have
brought claims against the U.S. Government
have been in some form or another successful;
is that --
A That's correct.
Q And would you agree that those past
claims were in general for claims related to
operating nuclear facilities?
A I'm not sure I understand. Can you
clarify, please?
Q Well, that they were for claims
related to -- for facilities that have not
yet entered into decommissioning.
A Let me just say that I think the
majority of the claims, as you are
suggesting, have been for plants that were
continuing -- that were operating. However,
I believe there are also claims associated
with plants that were shutdown. And while
they represent a minority of the claims, I --
my opinion is that there's been this general
level of success.
Q Are you aware of the change in the
strategy by the U.S. Government when
litigating these claims for decommissioning
plants?
A I'm not familiar specifically with
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that. That sounds like something I'd like to
learn more about.
MS. SALUSTRO: Thank you.
ALJ BUSHEY: Final questions for the
witness?
(No response.)
ALJ BUSHEY: Hearing none, then the
witness is excused.
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
identified four exhibits from the Utility
Consumer Action Network.
Exhibit 34 is the testimony of Mark
Fulmer and Laura Norin.
(Exhibit No. 34 was marked foridentification.)
ALJ BUSHEY: Exhibit 35 is the errata
to the testimony of Mark Fulmer and Laura
Norin.
(Exhibit No. 35 was marked foridentification.)
ALJ BUSHEY: Exhibit 36 is the
attachments to the testimony of Mark Fulmer
and Laura Norin.
(Exhibit No. 36 was marked foridentification.)
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ALJ BUSHEY: And Exhibit 37 is rebuttal
testimony of Mark Fulmer and Laura Norin.
(Exhibit No. 37 was marked foridentification.)
ALJ BUSHEY: Are there any objections
to those four exhibits being received into
the evidentiary record?
(No response.)
ALJ BUSHEY: Hearing none, then they
are so received.
(Exhibit No. 34 was received intoevidence.)
(Exhibit No. 35 was received intoevidence.)
(Exhibit No. 36 was received intoevidence.)
(Exhibit No. 37 was received intoevidence.)
ALJ BUSHEY: We also have exhibits from
TURN. Those are exhibits --
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record. We have Exhibit 30 and Exhibit 30 --
I'm sorry. Exhibit 29, the ORA testimony,
and Exhibit 30, an ORA data response from
Edison. Those two documents are received
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into the evidentiary record. I hear no
objections. Good. 29, 30 are received.
Now we begin the TURN Exhibits. 31,
32 -- 31 is the only TURN exhibit. And then
there are the cross exhibits from Edison, 32
and 33.
Are there any objections from any
party for Exhibits 31 through 33.
(No response.)
ALJ BUSHEY: Hearing none, they are all
received into evidence.
(Exhibit No. 31 was received intoevidence.)
(Exhibit No. 32 was received intoevidence.)
(Exhibit No. 33 was received intoevidence.)
ALJ BUSHEY: There were TURN
cross-examination exhibits earlier on. 25,
26, 27, 28.
MR. FREEDMAN: I think those were
already entered into evidence, your Honor.
ALJ BUSHEY: I've already done those.
Good. Okay.
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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While we were off the record, we
identified Exhibit 38. That is the prepared
testimony of John Geesman on behalf of the
Alliance for Nuclear Responsibility.
(Exhibit No. 38 was marked foridentification.)
ALJ BUSHEY: Any objections to this
being received into the evidentiary record?
(No response.)
ALJ BUSHEY: Hearing none, then
Exhibit 38 is received.
We'll be off the record.
(Exhibit No. 38 was received intoevidence.)
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
discussed the Gilmore testimony and the
Gilmore cross-examination exhibits. On
August 24th I issued a ruling denying
Edison's motion to strike the testimony from
the Gilmore party, however, indicating to
Gilmore that they would need to make a
demonstration linking the proposed testimony
to specific cost assumptions or contingency
planning in the record of this proceeding
before we would receive the testimony into
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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the evidentiary record.
Mr. Peffer is now prepared to offer
oral argument on that point.
MR. PEFFER: Your Honor, I would ask
for one point of clarification.
ALJ BUSHEY: Yes.
MR. PEFFER: What is the degree of
detail you are looking for in terms of tie
ins? Are you looking for specific line items
or -- that is something that we would prefer
to argue in our brief. We are prepared to
make arguments at an issue level now.
ALJ BUSHEY: Okay. Make it at an issue
level.
MR. PEFFER: Okay. So Section 1 of the
Gilmore testimony is a introduction. I think
it's fairly straightforward and doesn't need
a tie-in.
Section 2 is the dry storage system
lifespan. That speaks directly to the
reasonableness of the decommissioning cost
estimate, which relies -- per the discussion
that we've had several times over the course
of -- of these proceedings, relies on the
assumption that the DCE is based on that the
dry storage system will last for the duration
of the decommissioning process. That
assumption has been established. We've
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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established that the DCE relies on that
assumption. And each element of this
Section 2 directly addresses that.
So the first -- these questions
aren't numbered but if you go to page 3, line
9 through page 5, line 11, there is
discussion of the canister that was selected
by SoCal Edison, the High Storm UMAX Holtec
System. That discussion is relevant to the
lifespan of the dry storage system and the
reasonableness of that assumption because it
provides specific information regarding the
actual system that was selected and the
actual system that will be in use.
The next question again provides
specifications, that is page 513 through page
618.
The next question, which is page
620, addresses the design type of the
canisters that will be -- will be and are
being used in SONGS. They're thin steel
canisters, and that is a significant factor
in the lifespan -- determining the
lifespan -- determining the probability of a
shorter lifespan than the duration of the
decommissioning process.
Page 7 discusses whether the DCE
directly assesses the lifespan of the dry
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
508
storage system, which is relevant.
And line 23, we discuss SCE's claims
regarding the lifespan of the Holtec dry
storage system. Again, all of this ties into
that assumption. And that assumption is
something that has huge cost implications
because of the possibility that if some of
these canisters need replacement mid
lifespan, that is a significant unaccounted
for cost.
Page 8, this ties into the prior
discussion. 14, this is one of the bases
that SCE -- the Holtec FSAR identified as a
basis for its assumption that the system will
last for the duration of the decommissioning
process.
824 discusses whether the dry
storage system lifespan assumption is
consistent with the Holtec canister's NRC
license. If you recall that Mr. Palmisano
raised the NRC licensing as one of the bases
that he had offered for believing that the
dry storage system lifespan assumption was
reasonable.
Page 10, Question 24, this begins to
discuss actual real world information
regarding the lifespan of the Holtec System
that was selected.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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And page 11, line 24, what is a
through-wall crack. Through-wall cracking is
one of the -- as this testimony establishes,
one of the primary mechanisms for aging for
this type of system. And it's one of the
most likely possibilities for -- that would
lead to casks being unusable.
And the next page, page 12 describes
how through-wall cracks affect the dry
storage system lifespan, so it directly ties
the through-wall cracking discussion into the
lifespan assumption.
Page 13, what conditions cause
through-wall cracks to develop, the same
argument.
Page 15, are the conditions for the
through-wall cracks present in San Onofre?
ALJ BUSHEY: You're just reading the
testimony to me.
MR. PEFFER: I'm making arguments point
by point.
ALJ BUSHEY: I'm looking for it to be
tied to the decommissioning cost estimate.
Ideally, the -- the Attachment A I think to
Exhibit 01, line items. ]
MR. PEFFER: Right, your Honor. The
dry storage system assumption is -- life span
assumption is not something that is
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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specifically stated in the DCE. As we
established in the cross-examination earlier,
it is an implicit built-in assumption. And
what we would argue is to the extent that
that implicit assumption, because it has such
a significant effect on cost, to the extent
that that implicit assumption is not stated,
that's an error and a reason to find a DCE
unreasonable.
Would you like me to continue, your
Honor?
ALJ BUSHEY: I mean are you just going
to continue reading?
MR. PEFFER: Well, you asked for a
point-by-point connection. Like I said, we
don't have line item connections at this
point. That is something we are prepared to
offer in briefing.
ALJ BUSHEY: Well, we can't make
evidence in briefs. We only have arguments
there.
MR. PEFFER: Your Honor, I would object
to the fact that I think we're being held to
a more strenuous standard than other parties.
A lot of testimony has been offered in this
proceeding that is not line item specific.
ALJ BUSHEY: Like for example?
MR. PEFFER: Like, for example, most of
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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Palmisano's testimony.
ALJ BUSHEY: He was supporting the
whole thing.
MR. PEFFER: And this is directly --
what we would say is this is directly
relevant to the whole thing.
ALJ BUSHEY: Okay. So?
MR. PEFFER: Let me ask you, your
Honor. How you would you like me to proceed
on this?
ALJ BUSHEY: I was hoping that you were
going to tell me that, you know, there's a
particular number, and that is -- that needs
to change.
MR. PEFFER: Your Honor, what we can
say is all of the dry storage system cost
assumption relates to the $405 million.
ALJ BUSHEY: Okay.
MR. PEFFER: ISFSI costs.
ALJ BUSHEY: Okay.
MR. PEFFER: So we don't have -- and
the 25 percent contingency that goes into
that.
ALJ BUSHEY: Is there 25 to support?
MR. PEFFER: I believe it's 25 percent
across the board. I may be --
ALJ BUSHEY: It averages to that, I
think. Is the 25 percent included in the
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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405?
MR. PEFFER: I'm sorry, your Honor?
ALJ BUSHEY: Does the 405 include the
25 percent contingency?
MR. PEFFER: That is my understanding,
and I believe that's what was testified to.
ALJ BUSHEY: Okay. So it's your
position that the 25 percent contingency is
insufficient?
MR. PEFFER: That is something that,
yes, your Honor, but that's something we'd
like to cover in briefing.
ALJ BUSHEY: But you're going to need
some sort of factual basis for your
recommendation.
MR. PEFFER: Yes, your Honor. This is
the factual basis for that.
ALJ BUSHEY: This being the testimony.
So somewhere in this testimony there's a
number that says not 25 percent contingency
but something else?
MR. PEFFER: No, your Honor. I didn't
know that we were required to include that in
the testimony. This is the factual basis for
the recommendations that we make in the
briefing.
ALJ BUSHEY: But you don't have one
yet?
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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MR. PEFFER: At the moment, no. But
your Honor, my understanding is that many
parties in this proceeding have not offered
specific line item adjustments for all of
their arguments.
ALJ BUSHEY: Most of the parties aren't
opposing the estimate itself. For example,
ORA is opposing some of the procedural
mechanisms. TURN is suggesting that there
needs to be a, for want of a better word, a
refund mechanism adopted. You know, that's
where they're focusing.
MR. PEFFER: Right, your Honor. But
this isn't within the scope. I mean
challenging the reasonable notice of the
ISFSI assumption in the DCE, that is
clearly -- clearly pertains to the
reasonableness of the DCE.
ALJ BUSHEY: Okay. All right. Do you
want to conclude, and then we'll go to Mr.
Matthews.
MR. PEFFER: Your Honor, there are
other issues besides the life span issue.
ALJ BUSHEY: But don't they all relate
to the reasonableness of the system, the
casks?
MR. PEFFER: No. There are a couple of
issues that relate to -- at least one issue,
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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excuse me -- that relates to the -- well, we
have a spent fuel pool retirement.
ALJ BUSHEY: Okay. And I see concrete
degradation as well.
MR. PEFFER: Concrete degradation, your
Honor, is an issue that falls within the
scope of the dry storage system life span
assumption.
ALJ BUSHEY: Okay. Okay. All right.
Does that conclude your presentation?
MR. PEFFER: No, your Honor. I'd also
note that we have a section on reliance on
speculative technologies for inspection.
That's a matter that's been discussed in
detail over these hearings. And it relates
directly to whether or not the scheduling
cost estimates that do to some extent rely on
the availability of inspection technology are
consistent with Assumption 3 of the DCE,
which provides that -- I can actually read
that, which essentially states that all
decommissioning cost activities will be
performed using currently available
technology.
Your Honor, we also have testimony,
this is page 27, Item 7, regarding the 2024
waste acceptance date. And that's an issue
that's been well covered here. And items,
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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page 29, Item 8, which is dry storage system
costs. And then page 31, Item 10. These
again directly address the reasonableness of
the 405 million dry storage system cost. And
I would note that SoCal Edison did not object
to these and did not -- did not ask for these
to be stricken in a motion to strike.
ALJ BUSHEY: Okay. Thank you, Mr.
Peffer.
Mr. Matthews.
MR. FREEDMAN: Your Honor, I'd like to
offer an argument in support of Ms. Gilmore's
position.
ALJ BUSHEY: Okay.
MR. FREEDMAN: Your Honor, we're not
taking a position on the specific relief
requested by Ms. Gilmore in this proceeding.
However, we would point out that in past
nuclear decommissioning cost triennial
proceedings there have been substantial
arguments about specific assumptions
including operational assumptions that
utilities have made in providing their cost
forecasts.
For example, in the Humboldt Bay 3
decommissioning proceeding, the last NDCTP
was divided into two phases. The first phase
dealt with Humboldt 3, which was in active
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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decommissioning. There was a dispute about a
specific assumption PG&E had made regarding
the removal of the underground structures at
the facility. And TURN raised very specific
concerns about the particular measures that
PG&E was proposing to take and whether or not
they represented a least-cost solution.
Those issues were within the scope of that
case, and there was no debate about whether
those issues could or could not be litigated.
In the last NDCTP when the cost
estimate for Diablo Canyon was presented,
PG&E had made a number of assumptions
regarding specific actions that they would
take in the decommissioning, and those were
the subject of a litigation. And the
Commission ultimately found that PG&E had not
justified many of those very specific choices
they were claiming were reasonable.
In this case we're presented with a
very difficult issue where it's not clear
when a specific decision related to the
selection of waste canisters would ever be
found within the scope. As I understand it,
the issue that was raised by Ms. Gilmore
relates to a potential situation far down the
line well after the initial expenditures for
these canisters had been found to be
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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reasonable when Edison and SDG&E may decide
that they need to seek a lot more money
because of a decision that previously had
been found reasonable.
This leaves the Commission in a
difficult situation where a decision to find
this project reasonable early might end up
having to be undone by a subsequent
reasonableness determination. And I'm sure
the litigation around that would be quite
thorny.
I raise this because I think it's
important for the Commission to at least
consider this issue now. And again, we're
not taking a position on whether or not the
selection of the Holtec system is not
reasonable or is reasonable, but in a project
of this magnitude it is hard to understand
how such an important decision would simply
be deemed outside the scope of the proceeding
and be ineligible for review really at any
time.
If it were a construction project
for a new facility, the Commission would
exact -- would undertake this exact type of
review and would find this exact type of
operational decision relevant. So we think
it's within the scope of this case, and we
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think Ms. Gilmore should be allowed to
present her arguments.
ALJ BUSHEY: Mr. Matthews.
MR. MATTHEWS: Thank you, your Honor.
I think the statements from TURN's counsel
are -- would be more appropriately addressed
in the upcoming 2014 reasonableness review
proceeding as well as subsequent
reasonableness review proceedings. In this
proceeding it's focused on the reasonableness
of the SONGS 2 and 3 decommissioning cost
estimates.
And as SCE understands your Honor's
ruling, what you are seeking is for Ms.
Gilmore to tie her testimony to a specific,
you know, recommended, you know, cost
estimate number or adjustment to the SONGS 2
and 3 decommissioning cost estimate that is
before your Honor in this proceeding.
Gilmore hasn't done that, but if I
could compare that to what some of the other
parties have done. And this responds to one
of the arguments from Ms. Gilmore's counsel
is I think some of the other parties actually
have presented some real numbers. A for NR,
you know, counsel in cross-examination, you
know, definitely made their, you know, their
assertion as to what the removal cost would
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be. You know, that was done during
cross-examination. SCE doesn't necessarily
agree with the calculation, but the
recommendation was made.
I think, you know, TURN, the witness
as well has identified real numbers in their
testimony. And I think that that's the kind
of testimony that the, you know, the
Commission should be focusing on in this
proceeding. I also think that it would be
inappropriate for this to be done in brief.
I think it would be certainly out of order
the way things are normally done.
You know, if there was such a tie-in
done in brief, SCE and SDG&E would not have
an opportunity to conduct cross-examination.
So I think it's flipping it and putting it
out of order, and it would be inappropriate.
I'd also note that, you know, so far
all we've done is talk about the, you know,
the body of the testimony. We haven't talked
about the attachments. Now, there's 45
attachments to this testimony. It's quite --
it's quite voluminous. Most of the materials
are, you know, copies of, you know, the
various government agency letters. I think
those types of materials don't necessarily
need to be received into evidence and can be
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cited, you know, in brief.
I also think that, you know, the
attachments are cumulative. This, you know,
your Honor has discretion in order to, you
know, to reduce the volume of evidence that's
received, does not have to hear or consider
cumulative evidence. I mean there's dozens
of various reports and letters regarding
stress corrosion cracking and things of that
sort. And I don't think we need -- I think
it would be inappropriate to have that
cumulative evidence in the record.
There also are a number of documents
in the attachments that have not been
authenticated. I don't think there's any way
for Ms. Gilmore to authenticate them at the
time. There's a number of purported
presentations that were presented in NRC
meetings or DOE meetings. We don't know who
presented those, those presentations. We
don't know if it was the NRC. We don't know
if it's members of the public. And there's
not an opportunity for cross-examination on
those things.
I'll list those exhibits before you
with attachments. It's 10, 17, 20, 22, 24,
27. I'd also note that Attachment 14 is a
declaration of Ms. Gilmore. It provides her
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version of a transcript of statements made by
a Holtec representative during a October 14th
community engagement panel meeting. I think
that attachment is hearsay.
There's just lots of problems with
these attachments. Again, they're
cumulative. They're out of scope. They
haven't been authenticated, and a number of
the attachments are hearsay. And I think to
receive this into the record would, you know,
would be a mistake and would be an incorrect
ruling.
ALJ BUSHEY: Thank you, Mr. Matthews.
I'm going to rule unequivocally that the
reasonableness of the Holtec system is not
within the scope of this proceeding, and that
is not something that is going to be included
in the proposed decision. That's not --
that's completely consistent with the scoping
memo.
So that leaves us, though, with the
cost estimate. Mr. Peffer, you have focused
in on the $405 million and whether that's a
reasonable -- whether that's a reasonable
number.
MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: You believe there are
reasons that it should be higher.
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MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: That means that the
25 percent contingency factor, that's the
obvious place to adjust that. You are not
prepared today and your witness has not made
a specific recommendation?
MR. PEFFER: No, your Honor.
ALJ BUSHEY: And presumably, your
recommendation, which you believe you will be
able to make in your brief?
MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: Okay.
MR. PEFFER: Your Honor, may I make a
point very briefly. The scoping memo
includes as one of the areas for the --
within scope of this proceeding is the
reasonableness of the assumptions. Now, is
that something that you're saying -- so to
make an argument regarding the reasonableness
of an assumption, are parties required then
to connect those arguments to specific cost
figures?
ALJ BUSHEY: No. You have to tell me
what assumption it is that you believe to be
unreasonable. I understand it to be -- your
position to be that the $405 million for the
dry cask system is unreasonably low. It
should be higher. Is that a fair summary of
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your position?
MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: Okay.
MR. PEFFER: I would also say, go back
and restate my argument regarding there being
an implicit assumption regarding life span.
It should have been stated in the DCE. To
the extent that it wasn't, the DCE is flawed.
So I would tie --
ALJ BUSHEY: But that would go to this
number. This number should be something
else, right?
MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: Because that's all we're
doing is looking at a cost estimate. If you
can't tie your testimony to a specific number
and ask the Commission to do something with
that number, then it's not relevant to this
proceeding, because we're not going to look
at the reasonableness of operational
decisions. You know. Those are dealt with
elsewhere. We're just looking at the
reasonableness of the cost estimate.
This is what I'm thinking. I'm
thinking that we will grant your request to
let you make your numerical recommendation in
your brief.
MR. PEFFER: Yes, your Honor.
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ALJ BUSHEY: We will allow you to move
the testimony into the record, the testimony
alone.
MR. PEFFER: Okay.
ALJ BUSHEY: With its factual
assertions and its references, because most
of the references to the attachments are
readily available materials. But we will not
move in the attachments.
MR. PEFFER: So your Honor, there are a
couple of attachments that I do believe are
essential.
ALJ BUSHEY: Okay. Which ones would
those be?
MR. MATTHEWS: May I approach, your
Honor?
ALJ BUSHEY: Yes. What do you have?
We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record we
discussed the attachments to the Gilmore
testimony. This is what we're going to do.
We're going to mark the testimony as next in
order, which is 39.
(Exhibit No. 39 was marked foridentification.)
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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ALJ BUSHEY: It will be received into
evidence.
(Exhibit No. 39 was received intoevidence.)
ALJ BUSHEY: And we will have
late-filed Exhibit No. 40, which will be
provided within ten days by Gilmore. That
will be a compendium of the data responses
that were included in their proposed
attachments. That will be late-filed Exhibit
No. 40.
(Exhibit No. 40 was marked foridentification.)
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record we
discussed briefing schedule. Concurrent
opening briefs will be due on October 15th.
Concurrent reply briefs will be due on
November 5th. We've made a special exception
for the Gilmore party to include their
recommendation on the contingency factor to
be applied to the dry cask storage system.
If the utilities wish to respond to that
factual assertion, they will have five days
after receiving the brief to make that
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
526
response.
And the proceeding will be submitted
with the filing of reply briefs on
November 5th.
MR. PEFFER: And your Honor, we have a
couple more comments.
ALJ BUSHEY: Comments on what?
MS. GILMORE: Yes. The 400 million was
about the dry casks. The category of spent
fuel management is what we're focused on.
And a big part of that of course is the
canister cost, but there's other parts that
are integrated in that. So the one that we
want to address is that almost $1.3 billion
spent management category because it deals
with the pools, and it deals with the dry
cask system. They're interrelated. So if we
can have this at a higher level, at the
category level, then that's what we would be
addressing.
ALJ BUSHEY: So in your brief you will
address what the spent fuel management cost
estimate should be in your recommendation.
MS. GILMORE: Right.
ALJ BUSHEY: Okay.
MS. GILMORE: Okay. And then on the --
when the testimony was prepared, if we're
just going to include the name of the
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
527
document, some of these are hard for people
to find that may actually want to look at
documents to determine, you know, the
evidence. If we could provide the link, we
could do it as part of what we submit is the
list of the items and just provide the name
and the link to that document. It would make
it easier for anybody that's trying to review
this.
ALJ BUSHEY: We understand what your
testimony is, and we understand the source
documents that you're referring to, but we're
not going to bring the source documents into
the evidentiary record. So.
MS. GILMORE: Right.
ALJ BUSHEY: But as a practical matter,
everyone has a copy of them now anyway
because you distributed them. So I think the
practicalities are addressed. And I think
this way we keep the record fairly clean.
And you have an opportunity that no other
party has to basically make your case in
chief in your briefs. So I think that's a
pretty good deal.
MS. GILMORE: Okay.
ALJ BUSHEY: Okay.
MR. PEFFER: Just one other matter. I
don't know if this was included in the data
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
528
request responses. But Attachment 42 is an
e-mail that SCE provided us in response to a
data request. I'd like to include that in
the --
ALJ BUSHEY: In the late-filed exhibit?
Okay.
MR. PEFFER: Yes.
ALJ BUSHEY: Mr. Lutz.
MR. LUTZ: Yes, your Honor. Citizens
Oversight is planning to make arguments in
our brief regarding spent fuel management
especially with respect to the various
options that were considered by the utilities
about where they're putting the spent fuel
dry cask system which was explained in their
responses to some of our questions. We're
planning to include those in our briefs. So.
ALJ BUSHEY: That's what you do in
briefs. Yes.
MR. LUTZ: So I just wanted to make
sure that that wasn't excluded by your ruling
just now. ]
ALJ BUSHEY: No we want to hear your
arguments --
MR. LUTZ: Thank you, your Honor.
ALJ BUSHEY: -- legal and policy in
your briefs.
Is there anything further to come
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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before the Commission?
Yes, Mr. Geesman.
MR. GEESMAN: Mr. Matthews distributed
a common briefing format, and I wonder if it
would be appropriate to discuss that?
MR. MATTHEWS: I was going to raise it.
I don't know if we want to do it on the
record or off the record.
ALJ BUSHEY: We'll be off the record.
(Off the record.)
ALJ BUSHEY: We'll be back on the
record.
While we were off the record, we
discussed a proposed common briefing outline
offered by Edison. The parties will meet and
confer over the next 20 days to arrive at a
common briefing outline to the extent that
they can. If they cannot, the parties are
free to address these issues in whichever
manner they deem best for their client. I
will let you know that I will be following
something similar to this, so that will
assist you.
Is there anything further to come
before the Commission?
Yes?
MR. PEFFER: Yes, your Honor. There
were two additional exhibits that were
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
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cross-examination exhibits yesterday for
Bledsoe.
ALJ BUSHEY: Right. And you read all
of those into the record that were relevant,
the components of those.
MR. PEFFER: Well, we would like to
move to put those into the record.
ALJ BUSHEY: Why don't you include
those with your late-filed exhibit?
MR. PEFFER: And just another
clarification. So when we do include the
late-filed exhibit, is that something that's
going to be open to argument, will be ruled
on or --
ALJ BUSHEY: No, as long as you comply
with I've said.
MR. PEFFER: Yes, your Honor.
ALJ BUSHEY: And if you don't, there
will be motions to strike.
MR. PEFFER: Yes, your Honor.
And sorry. One other item. Will
there be an exhibit matrix distributed? Is
anyone preparing that?
ALJ BUSHEY: An exhibit matrix?
MR. MATTHEWS: SCE has been preparing
one. Maybe when we do the common briefing
outline, we'll send it to the parties --
we'll send what we have as our exhibit list.
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PUBLIC UTILITIES COMMISSION, STATE OF CALIFORNIASAN FRANCISCO, CALIFORNIA
531
ALJ BUSHEY: Okay. Sounds good.
Final matters?
(No response.)
ALJ BUSHEY: Hearing none, this
evidentiary hearing is concluded, and this
matter will be submitted with the filing of
reply briefs.
(Whereupon, at the hour of 1:43p.m., this matter having been submittedupon receipt of reply briefs November5, 2015, the Commission thenadjourned.)
* * * * *]
532
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE
STATE OF CALIFORNIA
Joint Application of SouthernCalifornia Edison Company (U338E)and San Diego Gas & Electric Company(U902E) to Find the 2014 SONGS Units2 and 3 Decommissioning CostEstimate Reasonable and AddressOther Related DecommissioningIssues.
))))))))))))
Application14-12-007
CERTIFICATION OF TRANSCRIPT OF PROCEEDING
I, Thomas C. Brenneman, Certified Shorthand
Reporter No. 9554, in and for the State of California
do hereby certify that the pages of this transcript
prepared by me comprise a full, true and correct
transcript of the testimony and proceedings held in
the above-captioned matter on August 27, 2015.
I further certify that I have no interest in the
events of the matter or the outcome of the proceeding.
EXECUTED this 27th day of August, 2015.
_________________________Thomas C. BrennemanCSR No. 9554
533
BEFORE THE PUBLIC UTILITIES COMMISSION
OF THE
STATE OF CALIFORNIA
Joint Application of SouthernCalifornia Edison Company (U338E)and San Diego Gas & Electric Company(U902E) to Find the 2014 SONGS Units2 and 3 Decommissioning CostEstimate Reasonable and AddressOther Related DecommissioningIssues.
))))))))))))
Application14-12-007
CERTIFICATION OF TRANSCRIPT OF PROCEEDING
I, Wendy M. Pun, Certified Shorthand Reporter
No. 12891, in and for the State of California do
hereby certify that the pages of this transcript
prepared by me comprise a full, true and correct
transcript of the testimony and proceedings held in
the above-captioned matter on August 27, 2015.
I further certify that I have no interest in the
events of the matter or the outcome of the proceeding.
EXECUTED this 27th day of August, 2015.
_________________________Wendy M. PunCSR No. 12891