UPDATE 4-San Onofre nuclear restart plan faces lengthy review
* NRC must approve San Onofre Unit 2 restart

* SCE wants to run Unit 2 at 70 pct for about five months

* Unit 3 to remain shut for additional tests

* Critics call plan "an experiment"

(Adds comment from company, environmental group, closing stock price)

By Eileen O'Grady

Oct 4 (Reuters) - A plan laid out by Southern California Edison on Thursday to restart one of two damaged nuclear reactors faces months of regulatory review plus skepticism from industry critics.

SCE, a unit of power company Edison International

,

submitted a plan to nuclear regulators to restart the 1,070-megawatt Unit 2 at San Onofre nuclear station in California, saying it will run the unit at 70 percent of capacity for five months before shutting it to inspect wear on damaged tubes within the reactor's steam generators.

Both San Onofre nuclear units have been shut since January following a small radioactive steam leak at one unit that pointed to a problem with accelerated degradation of tubes in the units' brand new steam generators.

San Onofre is the biggest power plant in Southern California. Loss of output from the units has increased the likelihood of power outages in the region, forcing the state grid operator to take steps to bolster the power grid.

New of the possible restart pushed Edison International shares up 1 percent to close at $47.10 on Thursday, after rising to $47.49 which was a 12-month high.

"We have concluded that Unit 2 at San Onofre can be operated safely and within industry norms," Ron Litzinger, SCE president, said in a statement. "When implemented, this plan will get San Onofre Unit 2 back to providing reliable and clean energy to Southern Californians."

It is not known how soon Unit 2 might restart since the plan must first be approved by the U.S. Nuclear Regulatory Commission, SCE said.

The NRC said months of inspection and analysis will be required before a decision is made.

"The agency will not permit a restart unless and until we can conclude the reactor can be operated safely," NRC Chairman Allison Macfarlane said in a separate statement.

"This could take a number of months. Our inspections and review will be painstaking, thorough and will not be rushed," Macfarlane said.

NRC had determined that the serious damage to thousands of tubes inside the steam generators was "unprecedented" and that the utility must identify the root cause and find ways to manage tube vibration before seeking approval to restart the units.

San Onofre 3, rated at 1,080 MW, will remain offline while the utility continues to study problems that SCE said are unique to that unit. A recovery plan may be submitted to the NRC next summer, officials said.

Both reactors can generate enough power to supply about 1.4 million Southern California homes.

'EXPERIMENT'

Nuclear industry critics called SCE's plan "an experiment" that could endanger 8 million people living nearby, citing the lack of repair work planned to address vibration that led tubes to rub against each other and against support structures inside the massive generators.

"They are not out of the woods by reducing the power to 70 percent; I just don't believe it is appropriate to treat Southern California as a science experiment," Arne Gundersen, a nuclear engineer, told reporters on a conference call.

"Running at reduced power may not fix the problems but rather make them worse or shift the damage to another part of the generators," said Gundersen, who works at nuclear consulting company Fairewinds Associates and who has prepared technical reports on San Onofre for Friends of the Earth.

Pete Dietrich, SCE's chief nuclear officer, said vibration analysis showed running Unit 2 at reduced output would eliminate some thermal hydraulic conditions that led tubes to rub against each other and would reduce tubes rubbing against supports.

"This is not an experiment," Dietrich told reporters. "We have conducted, over eight months, more than 170,000 tube inspections. We've assembled a renowned team of experts and we have brought independent analysis and evaluation to this process."

Dietrich said the experts concluded it will be safe to run Unit 2 for a short operating period, then shut it to "conduct another series of inspections to confirm our conclusions and that our corrective actions have been effective."

Noting that Unit 2 operated at full power safely for 21 months after new steam generators were installed in 2010, Dietrich said, "It's important to our customers that an asset that is able to be utilized safely is used to support the electric needs of our customers."

SCE officials declined to talk about how costs associated with the extended San Onofre shutdown will affect customer rates.

EMISSION, GRID CHALLENGES

The prolonged shutdown of San Onofre, located in San Clemente about halfway between Los Angeles and San Diego, has been felt by the grid agency, other power producers and California's carbon market, which will formally launch Nov. 14 when the state auctions about 61 million allowances.

Prices spiked for forward contracts for the permits in over-the-counter trading in July when the severity of San Onofre's problems were detailed by the NRC.

The absence of the carbon emissions-free power plant has been bullish for carbon permit prices, which utility companies like SCE will need to surrender to the state to comply with the coming environmental regulation.

With San Onofre out of service for the summer months, California's power grid operator had to make contingency plans to ensure sufficient power during the hottest days when consumers use air conditioning to escape the heat.

The ISO has already started making plans for next summer if San Onofre remains offline.

The steam generators built by Japanese multinational engineering firm Mitsubishi Heavy Industries Ltd

were installed in 2010 and 2011.

SCE shut Unit 2 on Jan. 9, 2012, for a planned outage. Unit 3 was safely taken offline Jan. 31, 2012, after station operators detected a small leak in a steam generator tube.

Nuclear fuel is being removed from Unit 3 and had been removed earlier from Unit 2, SCE said.

SCE operates San Onofre for its owners: SCE (78.21 percent), Sempra Energy's

San Diego Gas & Electric (20 percent) and the city of Riverside (1.79 percent).

(Reporting by Eileen O'Grady in Houston; additional reporting By Scott DiSavino in New York and Rory Carroll in San Francisco; editing by Maureen Bavdek, Bob Burgdorfer and Matthew Lewis)

((eileen.ogrady@thomsonreuters.com)(+1 713 210 8522)(Reuters Messaging: eileen.ogrady.thomsonreuters.com@reuters.net))

Keywords: ENERGY EDISON/SANONOFRE