San Onofre Shutdown: Economic Fallout

By Adam Townsend, originally posted June 18, 4 p.m.

The permanent retirement of the San Onofre Nuclear Generating Station and its accompanying layoffs have left plant employees and local businesses bracing for the economic fallout.

The toughest hit, of course, will be to the 1,100 workers whom Southern California Edison plans to dismiss. Beyond that, ripple effects will likely be felt by everyone from local hotel owners to Edison ratepayers, experts say. Retirement funds and state tax revenues could also feel a squeeze.

But the overall impact shouldn’t be disastrous, thanks to Orange County’s otherwise robust economy, forecasters note.

Job losses and workers' prospects

Richard Boyer, a radiation protection specialist who took a voluntary buyout during a previous round of layoffs at the plant, said employees were offered severance pay and benefits on a sliding scale based on years of service, which he assumed would be the case with the upcoming reductions. (Southern California Edison expects to shell out $70 to $80 million in severance packages for the 1,100 workers losing their jobs over the next six months or so, according to a Securities and Exchange Commission form the company filed earlier this month.)

Boyer took comfort in the fact that the 1,100 people losing their jobs would likely be in high demand, albeit probably far from San Clemente.

“It’s a highly skilled staff with a five-year security screening ... but it’s [1,100] relatively high-paying jobs disappearing in San Clemente,” he said.

Several years ago, with the average nuclear industry worker in his or her mid-50s, Edison and other industry players reached out to colleges, helping to educate and recruit young workers, Boyer said.

“The people I feel the worst for are my colleagues who are recent college graduates who were recruited to be the next generation of nuclear workers,” he said.

Linda Cohen, a UC Irvine professor who specializes in energy economics, agreed the 1,100 laid-off workers would likely be able to find jobs.

“If they are willing to move to other parts of the country, I suspect they’ll be in very high demand,” she said.

The layoffs will likely have a minor effect on the regional economy, Cohen said. The job losses are fairly minimal compared to when big defense contractors such as McDonnell Douglas closed shop in the 1990s, she said.

Switching from nuclear to gas

But there will be lasting effects, experts say.

Edison ratepayers will probably see higher bills -- to pay for the engineering blunder that shuttered the plant and/or the cost of importing replacement electricity. Meanwhile, California can expect Edison to claim sizeable tax write-offs from all the losses on the company’s books. And Edison shareholders -- including retirement account investment funds -- may also take a hit.

Cohen figures an important factor in Edison’s decision to close the plant was the surprisingly cheap cost of natural gas. Even five years ago, she said, no economist or market expert predicted natural gas would be so inexpensive.

If the plant were operating normally, Cohen said, San Onofre would continue to produce its 2,300 megawatts of power more cheaply than gas.

But there was too much uncertainty surrounding the botched steam tubes that caused the shutdown and a looming legal battle with their manufacturer, Mitsubishi. Moreover, the California Public Utilities Commission might order Edison to give ratepayers refunds on some or all of the $2 billion spent to keep the plant open while it wasn’t functioning over the last year-and-a-half.

Couple those circumstances with the Atomic Energy Licensing Board decision to make the company go through costly judicial hearings with no certain outcome, and purchasing imported natural gas electricity starts to look pretty good, Cohen said.

Another side effect: Edison may lose San Onofre’s carbon credit benefit, Cohen said. Under California’s 2006 cap-and-trade pollution law, Edison and other high carbon-dioxide polluters must buy costly permits for fossil-fuel burning.

San Onofre, which produced its 2,300 megawatts with zero carbon emissions, was fee-free, Cohen said. Natural gas is more efficient than coal -- it produces about half as much CO2 -- but still has carbon costs nuclear energy doesn’t, Cohen said.