A man walks his dog next to the damaged San Onofre power plant located next to San Onofre State Park in California, in this 2012 file photo. Southern California Edison, a unit of California power company Edison International, decided to permanently retire the San Onofre nuclear power plant. (Mike Blake/Reuters)

In a new setback for the U.S. nuclear power industry, Edison International said Friday that it would permanently close two reactors at its San Onofre plant in California, ending a contentious battle over whether the units could be repaired and operated safely after a Jan. 31, 2012, steam leak revealed cracks in the steam generator system.

The two reactors, built at a cost of about $2.1 billion, once provided 17 percent of the power delivered by the utility, and the loss of the units has forced Edison International and its Southern California Edison subsidiary to rely more heavily on renewable energy sources and new supplies of natural gas.

The company said that it could maintain power supplies for southern California, barring an unusually hot summer or fires that damage transmission lines. Edison chief executive Theodore F. Craver Jr. said he spoke to California Gov. Jerry Brown (D) on Friday morning about plans to ensure stability of the electrical grid.

“This is very much part of the uncertainty we are talking about, and we are anxious to resolve going forward,” Craver said in a conference call with reporters.

The closure of the plant comes three days after MidAmerican Energy, owned byBerkshire Hathaway, scrapped plans to build a small modular reactor in Iowa, while sticking with its plan to build up to 656 wind turbines in the state.

Although the San Onofre reactors were licensed to operate until 2022, critics said that the utility and its main contractor, Mitsubishi Heavy Industries, had hidden risks of a new steam generator system they installed in reactor unit 2 in 2009 and unit 3 in 2010 and that Edison needed a license amendment, a potentially lengthy process.

The new system, designed to last 20 years, failed in less than 2 after vibrations caused many of the 9,727 heavy alloy tubes in each steam generator to rub against one another. Unit 2 was already closed for maintenance, but unit 3 was shut down after an 82-gallon-a-day leak was discovered.

The decision to permanently shut down the reactors follows a May 13 ruling by the Nuclear Regulatory Commission’s Atomic Safety and Licensing Board. Weighing a challenge from Friends of the Earth, the board unanimously rejected the company’s arguments for restarting unit 2 at 70 percent of capacity, saying that a lengthier license amendment process was required.

Craver said that seeking a license amendment, and fending off legal challenges, would delay a restart enough that it would no longer be worthwhile. (San Onofre unit 1 operated from 1968 to 1992.)

Nuclear power foes rejoiced at the news. “After years of fighting toe-to-toe with the billion dollar nuclear industry, WE WON!” said an e-mail sent by Friends of the Earth, which had argued to nuclear regulators that the steam generators were the heart of the reactors and needed more scrutiny.

“We have long said that these reactors are too dangerous to operate, and now Edison has agreed,” said Erich Pica, president of Friends of the Earth.

Sen. Barbara Boxer (D-Calif.), chairman of the Senate Environment and Public Works Committee, said she was “greatly relieved.”

“This nuclear plant had a defective redesign and could no longer operate as intended,” she said in a statement. “Modifications to the San Onofre nuclear plant were unsafe and posed a danger to the eight million people living within 50 miles of the plant.” She added that she had become “increasingly alarmed that Southern California Edison had misled regulators by minimizing the scope of the changes made at the nuclear plant to avoid a full safety review and public hearings.”

The Nuclear Energy Institute defended Southern California Edison and the nuclear industry.

“This is a situation that is unique to Southern California Edison and the replacement of steam generators at the San Onofre reactors,” said Steve Kerekes, a spokesman for the institute, who added that the closures were “a blow to California’s energy diversity.”

He said that “this situation underscores the need for an efficient and effective regulatory process that results in timely decisions on the operation of these critical energy resources.” He said that independent firms had endorsed plans to restart San Onofre’s unit 2 and that
“it’s simply intolerable to delay decisions that impact millions of customers and the company’s obligation to provide electricity to those customers.”

Though the plants will stay closed, the controversy remains open. Craver said Edison International would seek compensation from Mistubishi for the faulty steam-generator design. And consumer groups are seeking the refund of extra costs, including for replacement fuel. Craver said costs subject to potential refund amounted to about $1.3 billion.

Edison International said it would take a charge of $450 million to $650 million and cut its earnings outlook by 20 cents a share. The company’s shares closed at $47.61 a share, up $1.25.