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RIVERSIDE PUBLIC UTILITIES loom Board Memorandum P U 6 L 1 C UIILCTiES BOARD OF PUBLIC UTILITIES DATE: December 2, 2011 ITEM NO: 5 _SUBJECT: AMENDED AND RESTATED SECOND AMENDED SAN ONOFRE OPERATING AGREEMENT BETWEEN CITY OF RIVERSIDE, CITY OF ANAHEIM, SAN DIEGO GAS AND ELECTRIC AND SOUTHERN CALIFORNIA EDISON ISSUE: That the Board of Public Utilities consider approval of the Amended and Restated Second Amended San Onofre Operating Agreement among the City of Riverside ("Riverside"), the City of Anaheim ("Anaheim"), San Diego Gas and Electric Company ("SDG&E") and Southern California Edison Company ("SCE"). RECOMMENDATIONS: That the Board of Public Utilities recommend that the City Council: 1. Approve the Amended and Restated Second Amended San Onofre Operating Agreement ("Amended and Restated DA"); 2. Authorize the City Manager, or his designee, to execute the Amended and Restated OA; and 3. Authorize the City Manager, or his designee, to execute any future amendments. BACKGROUND: The San Onofre Nuclear Generating Station (SONGS) is comprised of three (3) generating units: Unit 1, which permanently ceased operation in 1992, is jointly owned by SCE and SDG&E; and Units 2 and 3 which are jointly owned by SCE, SDG&E, Anaheim and Riverside. In accordance with the agreement governing SONGS ownership, Riverside holds 1.79% interest in all plant facilities of Units 2 and 3, and 1.49% interest in facilities which are common to all three (3) units, In 2004, SCE conducted inspections and analysis on the units and found that the four (4) steam generators in Units 2 and 3 had deteriorated and would need to be replaced. SCE estimated that the steam generators would last until 2009/2010 which was three (3) years prior to the final payoff of Riverside's outstanding debt for SONGS and 12 years before the expiration of the current license in 2022. On May 13, 2004, SCE sought approval from all SONGS owners to begin the Steam Generator Replacement Project. Anaheim elected not to participate in the steam generator replacement project. Subsequently, SCE and Anaheim entered into a Settlement Agreement on December 20, 2005 whereby Anaheim sold SCE their ownership shares in Units 2 and 3 and clarified SCE and Anaheim's responsibilities after the transfer of Anaheim's ownership share to SCE. The Amended and Restated OA makes conforming changes to plant ownership to reflect rights and obligations of the parties under the Operating Agreement after the transfer of Anaheim's ownership share in Units 2 and 3 to SCE. Riverside's ownership shares in Units 2 and 3 and Riverside's rights and obligations remain unchanged in the Amended and Restated OA,