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How will PG&E pay to close Diablo Canyon? Hint: It’ll show up on your electric bill

What will happen to Diablo Canyon after it closes?

Diablo Canyon nuclear power plant will be shut down in 2025 after its operating licenses expire.
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Diablo Canyon nuclear power plant will be shut down in 2025 after its operating licenses expire.

If PG&E’s application to shutter Diablo Canyon nuclear power plant in 2025 is approved in the coming months, ratepayers will likely see a new charge on their bills.

The company has proposed a short-term 1.6 percent average rate increase to pay for some of the costs of closing the nuclear power plant near Avila Beach — including a $350 million employee retention and retraining program, an $85 million settlement to local cities and San Luis Obispo County and $53 million the company spent while it was attempting to relicense its two nuclear reactors prior to reaching the closure agreement.

The change will add between $0.99 and $2.41 to the average residential customer’s monthly bill until the fee sunsets after eight years. Small commercial businesses’ bills would increase by about $4.63 per month.

The rate increase, which would affect all PG&E customers across California, will net the company about $1.8 billion.

The increase is still subject to approval by the California Public Utilities Commission, however, as part of the company’s closure application. A timeline has not yet been set for when the increase could show up on customers’ bills if approved.

Diablo_History004
The Diablo Canyon nuclear power plant near Avila Beach, shown in December 2001. David Middlecamp dmiddlecamp@thetribunenews.com

The Office of Ratepayer Advocates has criticized PG&E’s proposal, saying the burden of paying for the some of the closure costs — namely the local settlement that will help support the community through the closure — should be on company shareholders, not ratepayers.

“If PG&E wants to make a charitable contribution or a goodwill payment to the community, it is certainly entitled to do so, but not with ratepayer money,” the Office of Ratepayer Advocates wrote in its response to PG&E’s application. “Since PG&E is likely to issue public statements taking credit for the additional payments contained in the settlement to realize badly needed public relations value, there should be a shareholder contribution to cover these costs. Otherwise, the public may be misled into believing that shareholders are the source of the payments.

“PG&E should not be permitted to accrue goodwill associated with the incremental payments without making any contribution from its own shareholders.”

Laura Tudisco, attorney for the Office of Ratepayer Advocates, said the organization thinks Diablo Canyon could be shut down “for a fraction of the proposed cost.”

PG&E spokesman Blair Jones said the utility believes the costs should be covered by ratepayers because they will benefit from the transition to other greenhouse gas-free energy resources. He also said the employee retention and retraining program — one of the larger costs to be covered by the increase — is essential to keeping the plant running smoothly over the next decade and ensuring a safe transition to those other clean sources of energy.

Jones noted the closure could actually save customers money in the future. Relicensing and operating Diablo Canyon through 2044 would cost more than closing it and replacing that power source with a mix of renewable and energy-efficient sources. Some estimates show it would cost twice as much to operate the plant in the future, compared with energy-efficient options, Jones said.

PG&E notified ratepayers last summer of the possible rate increase, saying it was necessary for the “safe and responsible transition away from nuclear energy without increasing greenhouse gases.”

The largest portion of the fee funds will be spent adding new energy efficiency programs and proposals that would help the company save 2,000 gross gigawatt hours of energy, and reduce its overall energy use before the plant goes offline in 2025. According to the joint proposal, the company expects to spend about $1.3 billion on that effort. The rest will cover the employee program, the settlement and money spent on relicensing.

The fee funds are separate from the utility’s existing decommissioning fund. That fund, which has $2.7 billion in it to date, will cover planning, dismantling, restoration and spent fuel management during decommissioning.

Editor’s note: This story has been updated from a previous version to clarify Jones’ statements on the transition from Diablo Canyon to other greenhouse gas-free energy resources.

Kaytlyn Leslie: 805-781-7928, @kaytyleslie

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