"That (shipping it around the southern tip of South America) would be the leading option right now," SCE spokesman Ray Golden said, noting the decision by the Panama Canal Authority had been reached after months of negotiations.

Golden noted the reactor was well above the canal's current maximum allowable weight of 150 tons.

The reactor was shut down in November 1992 after 24 years in operation. It will be moved eventually to the only site that will currently accept it, run by Chem-Nuclear Storage Systems, a unit of Duratek Inc. (DRTK.O).

Golden noted that the reactor was now unlikely to be shipped before November 2003 at the earliest. It cannot be moved from April through October due to restrictions imposed to protect nesting sites of two species of birds, the least tern and snowy plover.

To be shipped, the reactor needs to be transported by truck across a beach in southern California which environmentalists say is a critical habitat for the birds.

Golden said the reactor has already been prepared for shipment, emptied of nuclear fuel and filled with concrete, although it remains radioactive.

The San Onofre plant, located in San Clemente, California, has two other nuclear reactors which are still operational with the capacity to produce around 2,200 megawatts of electricity, or enough to supply around 2 million homes.

SCE operates the plant and has a 75 percent stake.

Sempra Energy (SRE.N) unit San Diego Gas & Electric has a 20 percent interest, while the California cities of Anaheim and Riverside own the rest.

Golden noted the cost of moving the reactor would be covered by a $600 million trust fund set up to cover decommissioning costs.