The San Onofre nuclear power plant has grown into a half-billion dollar problem for Edison International since it was shut down last year. That led the company’s chief executive last week to say for the first time that permanent closure is a real possibility.

But the statement by the Rosemead company and its Southern California Edison utility, which owns 78 percent of the beachfront reactor, didn’t seem to shake investor confidence. The share price remained stable after the announcement.

It does increase uncertainty over the company’s future revenue, however.

“From a company and shareholder perspective, the true answer to the impact of retirement of the San Onofre Nuclear Generating Station is a big ‘to be determined,’” said Andrew Smith, senior equity analyst with Drexel Hamilton LLC of New York.

And that uncertainty could linger. That’s because lengthy battles are likely to follow over who will pay for the mounting tab: shareholders, ratepayers, insurers or Mitsubishi Heavy Industries Ltd., the Tokyo company that manufactured the steam generators that malfunctioned.

During the first 15 months the plant was shut down, Edison spent $109 million to staff and repair the plant and $444 million to buy replacement power. The cost of replacement power is expected to increase significantly, especially if a hot summer forces a jump in demand.

Edison is seeking to recover as much of these costs as possible from Mitsubishi and has also filed a claim for $183 million under its nuclear insurance program, Theodore Craver, chief executive of Edison International, said last week in a conference call with analysts.

Mounting uncertainty

While shutting down the plant would end the staffing and repair costs, replacement power costs would continue. And there would be a further battle over who would absorb the lost revenue from a permanent shutdown.

That uncertainty has cost shareholders, Smith of Drexel Hamilton said. The entire utility sector – including Edison – has soared to multiyear share price highs in recent months as investors have sought refuge from low interest rates in the treasury markets. But Edison’s stock hasn’t increased as much as other utilities: According to a Bloomberg analysis, Edison’s stock has increased 12 percent during the past six months, versus a sector average of 16 percent. Some utilities have seen their share prices go up as much as 24 percent over the past six months.

“Investors have looked at all this uncertainty and factored that in by discounting Edison’s share price,” Smith said.


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