The Debate for Keeping Diablo Canyon Open Past 2030 Is On. What Could It Mean for Your Bills?

California’s last working nuclear power plant cleared the final hurdle this month to keep producing energy. The U.S. Nuclear Regulatory Commission deemed the plant safe and environmentally sound to operate until 2045.

But under current California law, the plant only has until 2030, unless the state legislature takes action, a conversation that is gaining momentum in Sacramento.

Diablo Canyon’s proponents argue it could be a crucial piece of California’s effort to transition away from fossil fuels, as electricity bills continue to surge and electricity demand is forecast to rise. Research shows it will cost less money to keep the plant open than to close it and build out alternatives or purchase additional power.

But critics argue that Californians are paying PG&E more than necessary to keep Diablo Canyon running, because of an agreement negotiated with the state, which they say was rushed through with little scrutiny.

A new report by researchers at UC Santa Barbara found the utility inflated the costs of Diablo Canyon, and running it would still be profitable without certain fees imposed on ratepayers.

Extending the life of Diablo Canyon could keep energy costs down for Californians, critics said, but only if the agreement were restructured.

“It’s just kind of shocking how bad the deal was for ratepayers,” said Matthew Freedman, an attorney with The Utility Reform Network, who was consulted by the authors of the UC Santa Barbara Report, and has been raising the same concerns for years.

PG&E said the report ignored the facts and that the findings were false.

Diablo Canyon could save Californians money

Keeping Diablo Canyon open has the potential to save everyday Californians money on their electricity bills, according to multiple studies.

An analysis by the California Public Utilities Commission, the state agency that regulates utilities like PG&E, found that operating Diablo Canyon beyond 2030 would save anywhere from $600 million to $3.7 billion annually; largely because the state would have to build out less battery storage and offshore wind than if Diablo Canyon went offline.

An independent analysis conducted in 2021 by researchers at MIT and Stanford agreed that California would see significant savings by keeping Diablo Canyon open, though their calculations showed a lower number, roughly $2.6 billion between 2025 and 2035.

Jacopo Buongiorno, an MIT professor of nuclear science and engineering, who conducted that study, said while the research is now five years old, “the case remains absolutely compelling,” and costs for generating electricity at Diablo Canyon remain low.

Diablo Canyon’s proponents argue that its value includes health and climate benefits, because nuclear power doesn’t produce carbon dioxide, one of the primary drivers of climate change.

Maureen Zawalick, a PG&E senior vice president and chief risk officer, said that running Diablo Canyon in place of gas-powered plants leads to $450 million in savings annually, because of fewer health and climate impacts due to pollution.

“If Diablo Canyon is taken offline, what’s going to quickly replace that is gas,” said Nikhil Kumar, program director at the clean energy nonprofit GridLab, adding that it would create more planet-warming emissions and expose Californians to more price volatility. Eventually, that would change, Kumar said, as more renewable energy sources are built, but not in the immediate future.

Nuclear power runs 24/7, unlike renewables like wind and solar. That’s part of Diablo Canyon’s “clean energy value” for California, said Mohit Chhabra, a senior analyst at the Natural Resources Defense Council.

“We do have climate carbon goals, and if Diablo isn’t online, then the cost of complying with our carbon reduction policies changes because you have to buy more of other resources,” he said.

Critics say ratepayers and taxpayers aren’t seeing the savings

Diablo Canyon was set to close in 2025 under an agreement crafted a decade ago between state leaders, labor unions, environmental groups and PG&E. At the time, PG&E said it made financial sense to wind down operations, rather than relicense the plant, as the cost of renewables was falling and the state’s demand for energy was flat.

The decision was celebrated by those who’ve spent decades pushing to close the power plant, concerned by its location near seismic faultlines, the unsolved question of what to do with nuclear waste, and a cooling system that uses billions of gallons of ocean water each day, killing larvae and microorganisms in the process.

But after heat waves strained California’s power grid and caused rolling blackouts across the state in 2020, state lawmakers — pushed by Newsom — voted to extend the plant’s operations through 2030, in large part to give the state time to build more renewable energy sources.

While experts agree that keeping the plant going makes economic sense, many say the details of how to do that, written into 2022 legislation, are a bad deal for California ratepayers and taxpayers.

Critics also take issue with who pays for Diablo Canyon, as customers of PG&E, San Diego Gas & Electric, Southern California Edison, and local, nonprofit public agencies all pay for an asset owned and operated by PG&E. This new payment structure, ushered in by the 2022 legislation, differs from how other power plants in the state collect fees.

The law also authorized a $1.4 billion state loan to PG&E to continue operating Diablo Canyon, which Gov. Newsom’s administration said it believed would be paid back through federal funding or net revenues, revenues the utility does not forecast making.

On the same day the 2022 bill was signed into law, PG&E only applied for a $1.1 billion federal loan, however. The Department of Energy granted the loan, which has a base award of $741.4 million, and might go as high as the full amount if certain conditions are met.

If not, that will leave a gap of $658.6 million, which would be forgivable according to state law. Those costs could fall on an already strained state budget and taxpayers.

The new report by the UC Santa Barbara 2035 Initiative, a climate research and policy collaborative, said PG&E inflated the costs of operating Diablo Canyon when negotiating the plant’s extension, and is charging utility customers more than necessary, while PG&E generated record profits in the past three years.

PG&E recovers costs to operate Diablo Canyon through fees written into the 2022 legislation, which the report authors allege are excessive and unrelated to running the power plant.

“It’s not like this is a company in a financially tough place and it can’t keep this power plant open unless we give it some extra money,” said co-author Leah Stokes, a UC Santa Barbara associate professor who specializes in energy and environmental policy. “We’re talking about record profits year after year after year for a corporation that’s a monopoly, that’s providing an essential service to everyday people.”

Stokes and her co-authors wrote that if the fees in Diablo Canyon’s extension deal were eliminated, the plant would remain profitable while ratepayers would save an estimated $1.84 billion — or $250 for the average PG&E ratepayer — from next year through 2030.

“Diablo Canyon as a plant could operate quite economically efficiently,” Stokes said.

PG&E adamantly opposes the new report’s assertions, and spokesperson Lynsey Paulo wrote in a statement that the $1.4 billion loan “was necessary to provide funding for projects and activities necessary to transition the plant from the decommissioning path to extended operations, because PG&E did not have the funding necessary to transition the plant in the short period of time required.”

The utility said the Department of Water Resources, which manages the loan, audits PG&E’s expenditures every six months and has found them to be sound.

PG&E representatives said it costs each customer roughly $2.23 per month to operate the plant, and that amount is down about a dollar from last year.

TURN’s Freedman said that while that number may seem low, the plant has the potential to run so efficiently that customers should actually be getting a credit on their bills.

Freedman is not opposed to another extension of Diablo Canyon, but said the deal “needs to be reformed and revised if the plant is going to continue operating after 2030.”

Lawmakers are talking about it too. Assemblymember Buffy Wicks, chair of the committee on appropriations, “is part of ongoing conversations exploring whether the Diablo Canyon Power Plant’s operating authority should be extended beyond 2030,” according to her office.

While no decision has been made to pursue legislation, Wicks’ office said, powerful groups like the Bay Area Council are already actively lobbying in support.

State Sen. Ben Allen, who chairs the committee on energy, utilities and communications, said “if there is a need to keep Diablo online, I want to have real frank conversations about what we’re doing to improve clean energy build out so that we won’t be so reliant on this money pit that requires subsidies by ratepayers statewide, not just PG&E customers.”