California OKs Closure of Diablo Canyon Plants

The California Public Utilities Commission has agreed with an electric utility’s recommendation that it be allowed to permanently shut down its two nuclear reactors at the Diablo Canyon generating station in San Luis Obispo, coincident with the end of their current operating licenses. That means that Unit 1, in commercial use since 1985, will cease operations as of 2024, while Unit 2, which entered service in 1986, will be retired in 2025. The utility, Pacific Gas & Electric Company (PG&E), had informed the commission that while both units were still productive and accounted for about 9% of the state’s total annual electric generation, it simply would not be cost-effective to continue to maintain the facilities going forward.

Although consenting to the company’s proffered retirement plan, the commission acknowledged that shuttering of the units will translate into a loss of reliable and clean electricity generation for California. The commission noted as well that the two nuclear plants have represented an important, stable, and significant source of employment in the San Luis Obispo area for more than three decades.

Nevertheless, the commission concurred that the impact on generation resources and employment notwithstanding, “the time has come” to pull the plug on the facilities. In proposing that it not seek to extend its existing Diablo Canyon operating licenses for an additional period of time, PG&E told the commission that in light of recent state legislation requiring that increasing proportions of electricity generation come from renewable sources by 2030, it was imperative that the utility begin now to transition away from its nuclear power plants and focus on other avenues of clean energy, such as solar and wind. The utility pointed out that the new state law requires that 50% of all electricity sales come from renewables by 2030. The company remarked that even though nuclear power is essentially carbon-free, thus qualifying as a source of “clean” energy, it does not fit the exact definition of renewable energy. Moreover, PG&E claimed, the cost of running nuclear reactors has been climbing, making future reliance on nuclear power cost-prohibitive.

In presenting its closure plan to the commission, PG&E asked for ratepayer-supplied funding for programs designed to help ameliorate the economic impact of the shutdown of Diablo Canyon on the San Luis Obispo vicinity. More specifically, the utility requested authority to collect $1.76 billion from customers to cover costs associated with retirement of the units. The company broke down that total as follows: $1.3 billion for energy efficiency as a means of partially offsetting the loss of Diablo Canyon’s output; $363.4 million for employee retention and retraining; $85 million for a community impact mitigation program; and $18.6 million in expenses already incurred in a license renewal proceeding before the Nuclear Regulatory Commission (NRC).

While the California commission was receptive to certain aspects of the plan, it agreed to ratepayer funding at a far lower level than what had been sought by the utility. That is, the commission provided for a total of only $241.2 million in Diablo Canyon-related rate recovery. Of that amount, $222.6 million was earmarked for employee retention and retraining while the NRC license renewal costs were allowed in full at $18.6 million. Although denying the company’s request for monies for energy efficiency and community impact mitigation programs in the instant docket, the commission noted that PG&E is not completely foreclosed from securing funds for such. However, the commission said, any such monies must be allocated through a different process.

As to energy-efficiency measures or other approaches for offsetting the loss of Diablo Canyon production, the commission said that the utility’s proposal would be better considered within the context of its next integrated resource planning (IRP) case.

The commission stated that such proceedings offer a superior forum for examining and comparing various generation resources and determining how best to go forward with procuring capacity to replace the power heretofore provided by the nuclear plants. The commission emphasized that an IRP docket is better suited to weighing various generation sources so as to arrive at an “optimal mix” of generation origins to assure attainment of state goals for reducing greenhouse gas emissions while not jeopardizing system reliability and cost-effectiveness.

As to the company’s community impact mitigation proposal, the commission came to the conclusion that it simply was without authority to rule on the plan. It told the utility that the program, at least as presented by PG&E, requires authorization from the state legislature. Of course, the commission added, the utility is always free to devote shareholder funds to such an effort instead.

In finding the Diablo Canyon retirement plan reasonable overall, the commission noted that the station’s shutdown will mark the end of an era, as the units are California’s last remaining nuclear facilities. The commission commented that although local governmental authorities had expressed concerns about the economic fallout from closure of the plants, others had warned about the physical fallout from the plants should an earthquake strike and the units be damaged like the Fukushima facilities in Japan were in 2011. The commission acknowledged the merits of those concerns given Diablo Canyon’s proximity to two fault lines. Although the NRC previously had deemed the units strong enough to endure an earthquake, the commission found that with California’s move toward renewables and with other sources of power coming in at a far lower cost than nuclear, it made sense to begin the process of shutting down the units now. Re Pacific Gas & Electric Co., Decision 18- 01-022, Application 16-08-006, Jan. 11, 2018 (Cal.P.U.C.).