Environment

What does PG&E filing for bankruptcy mean for Diablo Canyon?

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.

News that San Luis Obispo County’s largest private employer plans to declare bankruptcy in the coming days had some officials worrying Monday, with many noting PG&E’s plans could put the decommissioning of Diablo Canyon nuclear power plant in jeopardy.

“I am very concerned about layoffs that could affect employees who live in our community, and I remain concerned that the plant operate to the end of its licenses,” county Supervisor Adam Hill said in an email to The Tribune on Monday. “There are no (greenhouse gas)-free replacements that could make up for the power the state’s grid needs. It would be very bad for the state to allow it to go offline sooner than its licensed end.”

John Geesman, legal counsel for the San Luis Obispo-based activist group Alliance for Nuclear Responsibility, said “this is a period of enormous uncertainty.”

“The bankruptcy process is going to result in questions being asked in a bankruptcy court that no one could have foreseen prior to the bankruptcy proceeding,” he said. “For example, is the Diablo Canyon power plant a marketable asset?”

Chapter 11 reorganization

The utility company warned its employees on Monday that it plans to file for Chapter 11 reorganization as it faces billions of dollars in liability for its role in last year’s devastating California wildfires. (Investigators blamed PG&E’s power lines for sparking a number of blazes in 2018.)

“PG&E expects that the Chapter 11 process will, among other things, support the orderly, fair and expeditious resolution of its potential liabilities resulting from the 2017 and 2018 Northern California wildfires, and will assure the company has access to the capital and resources it needs to continue to provide safe service to customers,” read a news release on the company’s website Monday morning.

PG&E intends to file bankruptcy on or about Jan. 29, according to the release. The company will not go out of business as a result of the filing, it said, and it does not expect any impact to natural gas or electrical service for customers.

Ahead of the notice, PG&E CEO Geisha Williams resigned Sunday, to be replaced by interim CEO John Simon.

This isn’t the first time the California utility company, which provides power to 16 million customers, has filed for bankruptcy. It previously declared bankruptcy in 2001, and emerged from reorganization three years later.

Diablo Canyon decommissioning

PG&E spokesman Blair Jones on Monday said “there are no specific plans to close Diablo Canyon early” and that no layoffs have been announced as part of the reorganization.

“PG&E does not expect any impact to electric and natural gas operations during this process, including Diablo Canyon operations,” Jones said. “Throughout this process we will continue to operate our electric and natural gas business as usual. There are no specific plans to sell or close Diablo Canyon early.”

The company employs more than 1,600 people in San Luis Obispo and northern Santa Barbara counties, Jones said.

Just a month ago, PG&E officials announced they would be asking for $1.6 billion from ratepayers to pay for the safe shutdown of the plant. Those plans are pending a decision by the California Public Utilities Commission, and it’s unclear whether bankruptcy proceedings could in some way impact them.

Jones said the company is still committed to that plan.

“We’re going to continue down that path,” he said.

He added: “The CPUC has an obligation under state law to fund the reasonable costs of decommissioning. We expect the CPUC to review the application in the normal course and issue a funding decision in 12 to 18 months. Any funds authorized by the CPUC will be deposited into the decommissioning trusts.”

Notably, the $3.2 billion the company has set aside to partially fund the decommissioning process won’t be at risk during the bankruptcy proceedings, Jones said. That money is “bankruptcy-remote” and by law can’t be accessed by creditors.

Assistant county administrative officer Guy Savage said the county Board of Supervisors is expected to discuss PG&E’s filing to the CPUC in closed session on Tuesday.

“I would anticipate that we would be providing our responses to that filing before the end of the response period,” Savage wrote in an email to The Tribune.

He said requests for comment on potential changes to the decommissioning process in light of the bankruptcy announcement would be better directed to PG&E.

When asked if the bankruptcy filing could impact the company’s decommissioning funding request, CPUC media representative Terrie Prosper said the state organization is working in coordination with Gov. Gavin Newsom’s office and other agencies to “closely monitor PG&E, including developments regarding its leadership, financial status and legal filings, and is prepared to respond as appropriate.”

“The CPUC always takes care to ensure that the utilities can provide all customers electric and natural gas service,” she wrote in an email to The Tribune. “At this point, PG&E has sufficient resources to continue to safely meet its core responsibilities and obligations.”

Local response

Geesman, of the Alliance for Nuclear Responsibility, said in the coming months that much of the agreed upon decommissioning process for Diablo Canyon could be called into question.

For example, he asked, could another energy company be interested in acquiring the power plant’s licenses and attempt to keep it open? Would the Nuclear Regulatory Commission even consider that a possibility? What about the potential for selling the plant to another company that specializes in decommissioning?

“These are all unknowns in the process, until you actually get in the process,” Geesman said. “But for better or for worse, the San Luis Obispo community doesn’t really have a recognized seat at the table in the bankruptcy process. The bankruptcy code is prioritized to creditors.”

Soon after the bankruptcy announcement Monday, other officials began weighing in on the potential impact on San Luis Obispo County.

“PG&E’s notice of intent to file for bankruptcy is unfortunate, as it is San Luis Obispo County’s largest private employer,” Assemblyman Jordan Cunningham said Monday in an emailed statement to The Tribune. “Throughout the coming process, I will do whatever I can to protect our region’s PG&E employees and ensure that Diablo Canyon nuclear power plant remains operational.”

Rep. Salud Carbajal issued the following statement Monday:

“The Nuclear Regulatory Commission has the resources it needs to remove all radioactive materials from the site and ensure a safe decommissioning at Diablo that meets federal requirements,” he said in an email to The Tribune. “It’s critical that PG&E lives up to their commitment to complete a full decommissioning that meets California’s standards as well. As the community faces this closure, I will continue working to help retrain our skilled workforce and encourage new renewable energy production to meet the needs of Central Coast residents.“

In a message to members, the International Brotherhood of Electrical Workers 1245 — the labor union representing many local PG&E workers — said it was prepared to protect members through the bankruptcy proceedings.

“Our goal is to protect you completely, keeping your wages, benefits, and working conditions unaffected by the filing,” read the message. “We were successful in doing this in the 2001 bankruptcy, and we are prepared to do so again.”

The union also said it has retained bankruptcy counsel and “will do all we can to keep the pension completely protected and out of the bankruptcy proceeding.”

For more information on the reorganization process, visit PG&E’s “Reorganization Information” page on its website, www.pge.com.

Editor’s note: This story has been updated with additional comments from PG&E spokesman Blair Jones and local officials.

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Kaytlyn Leslie writes about business and development for The San Luis Obispo Tribune. Hailing from Nipomo, she also covers city governments and happenings in the South County region, including Arroyo Grande, Pismo Beach and Grover Beach. She joined The Tribune in 2013 after graduating from Cal Poly with her journalism degree.
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