San Onofre Shutdown Will Bring Economic Fallout, Forecasters Say

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 San Clemente 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 the Local Economy

The first pinch from the shutdown may be felt by San Clemente hoteliers, some of whom relied on the power plant’s out-of-town contractors to fill rooms during the off-season.

“It’s bad news,” said San Clemente Chamber of Commerce Director Lynn Wood. “Really bad news. They didn’t just have those 1,100 [staff employees]. They had other people that came in every six months and stayed in the hotels.”

Fewer room rentals also means a dip in hotel bed taxes. Last fiscal year, those taxes brought San Clemente more than $1 million. But City manager T. Pall Gudgeirsson said he was optimistic the shutdown wouldn’t have a huge effect on city revenues. Helping to cushion the blow: The process of decommissioning and maintaining the plant in coming years will require different batches of contractors to set up shop in San Clemente, he said.

Still, local shops and restaurants may suffer from the staff layoffs.

“In the mornings, we get a lot of employees from the power plant who support us,” said Allen Chang, an employee at Surfin’ Donuts on the south end of El Camino Real. “They would always buy dozens -- they would buy them for their co-workers. It’s going to be a blow, but we’re confident in our [other] clientele.”

Wood pointed to the hit the local economy was already taking from 730 jobs eliminated last year -- jobs Edison said were on the chopping block even before a radioactive steam leak revealed widespread engineering problems, leading to the shutdown.

According to past presentations by Edison officials to the San Clemente City Council, about 500 San Onofre employees live in San Clemente.

One of those is Richard Boyer, a radiation protection specialist who took a voluntary buyout during last fall’s layoffs.

He 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, but 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.

Still, Boyer worries that some of the plant’s younger employees will be let go with a fairly meager severance because of their short time at the plant. 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 may 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.