DIABLO CANYON FRAMEWORK
August 29, 2022
The final version of the Administration’s proposal to give the state the option of
extending the Diablo Canyon Power Plant’s life by five years to meet the state’s
future energy needs is now in print.
This isn’t an option we thought we needed going into 2022. But two things
changed earlier this year that have made it necessary for the state to act
quickly.
First, international supply chain disruptions and delays in bringing new clean
energy generation and storage systems online left the state temporarily behind
schedule in meeting its renewable energy goals—a potential shortfall that could
arrive just as the climate crisis threatens our electrical grid more broadly and as
demand for electricity is growing even faster than expected. Energy shortages,
especially during a heatwave, could lead to outages across the state, creating
health and safety risks, especially in vulnerable communities.
Second, the federal government launched a new $6 billion program to support
nuclear power, including a fund specifically designed to extend the life of plants
like Diablo Canyon that were set to retire.
So, faced with greater need for energy and an opportunity to secure funds that
would make it economical for Californians to continue getting clean energy
from Diablo Canyon, the state began mapping out this opportunity to extend
Diablo Canyon’s life, as a stopgap and contingency measure for these few
critical years. Qualifying for that federal program, however, requires changes in
law to allow PG&E to take steps to extend the life of the plant. And because
PG&E must apply for the federal program by September 6—and because
relicensing a nuclear power plant is normally a multi-year process—the
Legislature needs to act this session to keep this option open and enable PG&E
to apply to receive substantial federal funds to support relicensing.
This proposal does the minimum necessary to keep the option of extending
Diablo Canyon on the table. If the CPUC determines that new renewable
energy and zero carbon resources have come online in sufficient quantity to
meet California’s reliability standards, Diablo Canyon will not be extended.
The final proposal reflects a number of improvements based on feedback from
the Legislature, including lowering costs for ratepayers even further,
strengthening state oversight, and setting a finite term of 5 years for the plant’s
potential extension. The final proposal also requires the California Energy
Commission to assess both the need and the cost effectiveness of a Diablo
Canyon extension in an open public process.
The framework would allow for Diablo Canyon to operate for five additional
years. Currently, Diablo Canyon’s two units are scheduled to retire in 2024 and
2025. Diablo Canyon currently supplies approximately 17 percent of California’s
zero-carbon electricity supply and 8.6 percent of total electricity supply. This
proposal creates the path to allow Diablo Canyon’s two units to operate
through October 31, 2029 for Unit 1 and October 31, 2030 for Unit 2.
Most of the funding to relicense the plant is expected to be reimbursed by the
federal government through the Department of Energy’s Civil Nuclear Credit
Program. To qualify for that federal funding, the Legislature must take action
by the program’s September 6 application deadline. PG&E cannot apply for
the DOE funds without changes in state law allowing for an extension and
providing a feasible pathway to relicensing and post-extension operations.
The proposal includes authorization for a loan to PG&E of up to $1.4 billion, of
which $800 million will require a subsequent appropriation by the Legislature. The
federal government is expected to cover most if not all of the cost of the loan. If
the federal government concludes that Diablo Canyon is ineligible for federal
funding, the loan will be terminated.
LEGISLATIVE IMPROVEMENTS
● Ensures that this bill helps California energy customers, not PG&E
shareholders.
○ Prohibits any use of state loan funds as profit or to pay shareholders.
○ Requires that PG&E invests the per-megawatt-hour incentive
payments it gets from Diablo Canyon into accelerating our
transition to renewable and zero-carbon energy and strengthening
our electrical grid—not shareholder profits.
● Preserves the option of extending Diablo Canyon while building in off-
ramps if circumstances change before 2024.
● Terminates the loan and requires return of unexpended and uncommitted
funds if Diablo Canyon is deemed ineligible for federal funding
● Requires additional studies as a condition of the loan, including an
updated seismic assessment, and a report on the capacity of existing wet
and dry spent fuel storage.
● Decreases by 35 percent an incentive payment for extended operations
to $13 per MW hour for customers of PG&E, and $6.5 dollars per MW hour
for customers of other PUC jurisdictional utilities.
○ Prohibits the use of these funds for corporate profits or to pay
shareholders, and does not allow PG&E to earn a rate of return for
the extension of Diablo Canyon.
● Adds new requirements and constraints to ensure PG&E profits from this
proposal are lower during the extension than what PG&E has earned from
DCPP in recent years.
● Market revenues must be credited back to ratepayers.
● Energy prices are projected to go up in the coming years. This structure to
extend the life of Diablo Canyon is a cost-effective option. It is expected
to have little to no impact on rates and could even result in credits for
some ratepayers.
● Sets a fixed timeline for the extension at five years.
● Ensures that the California Coastal Commission and other state regulators
will review the proposal in accordance with existing state law.
● Requires that the state stay on track with renewable-energy procurement
and accelerate our transition to clean power.
● Increases by $1 billion funding to accelerate the deployment of clean
energy resources, support demand response, assist ratepayers, and
increase energy reliability.
A FISCALLY RESPONSIBLE PROPOSAL
This is a fiscally responsible proposal that protects ratepayers while helping
ensure we can keep the lights on. Climate change is increasing demand for
power, while reducing supply from existing sources. This proposal preserves the
option to keep Diablo Canyon open should it be necessary for energy reliability
in the interim years as we transition to a 100 percent zero carbon and
renewable energy future. Preserving this option allows the state to have enough
power in future years to meet demand and avoid dirtier and more expensive
sources of backup power.
RESTRICTIONS ON PG&E
PG&E will be compensated for operating the Diablo Canyon Power Plant.
However, this plan places strict limits on PG&E’s ability to earn profits from
operating the plant. It also puts in place critical safeguards to protect
ratepayers and the state.
ENSURING A CLEAN, AFFORDABLE AND RELIABLE ENERGY TRANSITION
This proposal increases requirements and accountability for California energy
agencies that are responsible for delivering on California’s climate goals while
ensuring reliability. The planning and reporting requirements in this proposal will
allow for more effective oversight of both progress and challenges and more
timely interventions when needed. Finally, by setting aside over $1 billion to fund
the Clean Energy Reliability Investment Plan, this proposal lays the groundwork
for a new round of major state investments in a clean, reliable energy transition.
