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PG&E CEO Tony Earley’s letter to employees on Diablo Canyon closure

PG&E CEO and President Tony Earley.
PG&E CEO and President Tony Earley. The Tribune

Editor’s note: This letter was sent to all PG&E employees on June 21 by the company’s top executives, led by PG&E President and CEO Tony Earley Jr.

Team,

This morning, we are announcing a proposal under which we would operate the Diablo Canyon Power Plant (DCPP) until the end of its original operating licenses in 2024 and 2025 but would not seek to relicense it for operations beyond that period.

We are incredibly proud of the men and women who have made DCPP one of the finest nuclear stations in the country and who, in doing so, have provided our state with GHG-free energy for three decades. As such, the decision to forego relicensing has been a difficult one. We took a great deal of time to consider this important matter, and our Board of Directors was highly engaged as well.

Ultimately, the decision was driven by the dramatic changes that are taking place in California’s energy landscape with renewables and energy efficiency being favored by the state. We have done extensive analysis based on a range of scenarios, and the overwhelming conclusion is that much of Diablo’s baseload energy output will not be needed past 2025. Others have reached similar conclusions.

Key contributing factors include:

▪  California’s policy preference for renewables over other GHG-free resources such as nuclear;

▪  The increase of the Renewable Portfolio Standard to 50 percent by 2030;

▪  Doubling of energy efficiency goals under State Senate Bill 350;

▪  The challenge of managing overgeneration and intermittency conditions under a resource portfolio increasingly influenced by solar and wind production;

▪  The growth rate of distributed generation resources; and

▪  The potential increases in the departure of PG&E’s retail load customers to Community Choice Aggregation.

In addition to this, we have a separate but important problem with the fact that the State Lands Commission has to approve a lease extension without which we cannot operate beyond 2018. We strongly believe that premature closure of DCPP would be the wrong answer for our employees, the community and the state.

As we assessed all of these issues, we developed four objectives:

▪  Avoid a premature closure of DCPP;

▪  Ensure the safe operation of the plant;

▪  Take care of our employees and the community; and

▪  Meet the state’s new energy objectives, including energy efficiency and GHG-free energy resources.

That led us to build a coalition with labor and with several environmental groups who have agreed to express their support for the regulatory actions we need to meet our objectives, including the extension of leases by the State Lands Commission.

The coalition includes IBEW Local 1245, Coalition of California Utility Employees, Natural Resources Defense Council, Friends of the Earth, Environment California and Alliance for Nuclear Responsibility. We believe their support will be critical to us achieving our objectives.

This is a coalition with some diverse points of view. We came to this agreement with some different perspectives — and we continue to have some different perspectives — but the important thing is that we ultimately got to a shared point of view about the most appropriate and responsible path forward with respect to Diablo Canyon and how best to support the state’s energy vision.

Together, we have proposed that DCPP be replaced with a greenhouse gas free portfolio of energy efficiency, renewables and energy storage. The proposal includes an increase in PG&E’s target for renewables to 55 percent, effective in 2031, as compared to the state’s goal of 50 percent renewables by 2030. This is an unprecedented voluntary RPS commitment by a major U.S. energy company.

Recognizing that the procurement, construction and implementation of a portfolio of energy efficiency and GHG-free energy resources will take years, the parties recognize that PG&E intends to operate Diablo Canyon to the end of its current NRC operating licenses, which expire on November 2, 2024 (Unit 1), and August 26, 2025 (Unit 2).

This nearly decade-long transition period will provide the time to begin the process to plan and replace Diablo Canyon’s energy with new GHG-free replacement resources.

Under the terms of the joint proposal, PG&E will cease any efforts to renew the DCPP operating licenses and will ask the NRC to suspend consideration of the pending DCPP license renewal application. The NRC application will not be withdrawn until the CPUC approval of the joint proposal application.

There is more work to do to ensure we can continue to operate this plant through 2025. The joint proposal is also contingent on a number of regulatory actions, including:

▪  Approval of a lease extension to 2025 from the State Lands Commission, which is meeting June 28 to consider this matter;

▪  Approval by the CPUC of the proposed plan for replacement of DCPP with greenhouse gas free resources. Any resource procurement PG&E makes will be subject to a non-bypassable cost allocation mechanism that ensures all users of PG&E’s grid pay a fair share of the costs;

▪  CPUC confirmation that PG&E’s investment in DCPP will be recovered by the time the plant closes in 2025; and

▪  CPUC approval of cost recovery for appropriate employee and community transition benefits.

We believe the transition period in the joint proposal represents a responsible approach that allows time for the needs of employees and the community to be properly addressed. To be clear, we are absolutely committed to supporting our valued employees at Diablo Canyon and the community.

Our program will include, among other things:

▪  Incentives to retain employees during the remaining operating years of the plant;

▪  A retraining and development program to facilitate redeployment of a portion of plant personnel to the decommissioning project or other positions within the company; and

▪  Severance payments upon the completion of employment.

We have reached agreement on these benefits with the IBEW, and PG&E will immediately engage in bargaining with its other labor unions to ensure appropriate benefits for represented employees.

In addition, the joint proposal includes payments by PG&E to San Luis Obispo County totaling nearly $50 million. The proposed payments are designed to offset declining property taxes through 2025 in support of a transition plan for the county.

We recognize that today is a difficult day for all of us who support the benefits of nuclear power and have spent our careers working to realize those benefits. We believe this agreement provides DCPP employees with the best possible opportunity for a successful transition.

Today, we will be conducting a series of informational meetings for DCPP employees at the site with more details. In addition, we will be conducting a call for all PG&E employees at 10 a.m. Invitations for these meetings will be forthcoming.

Today and in the coming days, we ask that all employees stay focused and work safely.

Tony Earley, PG&E president and CEO; Geisha Williams, PG&E president, electric; and Ed Halpin, senior vice president, generation, and chief nuclear officer.

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