By Malena CarolloCalMatters
This story was initially printed by CalMatters. Join for his or her newsletters.
State utility regulators subsequent week are slated to wrap up a three-year effort to maintain open California’s solely remaining nuclear plant, Diablo Canyon.
The ultimate step: Hammering out how plant-owner Pacific Gasoline & Electrical should spend and report the way it makes use of a controversial statewide charge to maintain the ability open.
One member of the California Public Utilities Fee, important of the extent of scrutiny being given to funds within the case, has twice held the matter again from a vote. Client and nuclear security advocates argue that commissioners will likely be greenlighting an annual slush fund of a whole bunch of tens of millions of {dollars} for the utility that would find yourself enriching shareholders in the event that they approve it as proposed.
“The commission is ready to throw in the towel and say they’re not interested in spending the time and resources on fighting this,” Matthew Freedman, lawyer for The Utility Reform Community, mentioned. “They’re going to let PG&E do what it wants.”
“They’re going to let PG&E do what it wants.”
Matthew Freedman, lawyer for The Utility Reform Community, a client advocacy group.
PG&E argues that state regulators don’t have the authority to conduct the extent of oversight advocated by critics comparable to The Utility Reform NetworkGroup, and it shouldn’t be hemmed in on the way it can use the charge that the Legislature enabled. It has made the case that spending the charge on different authorised areas in addition to Diablo Canyon can even assist management prices for patrons.
Initially anticipated to shut this yr for financial causes, Diablo Canyon noticed its operations prolonged till 2030 to provide California extra vitality safety whereas transitioning to renewable sources. controversial bipartisan laws that enabled the plant to maintain operating was authorised within the wake of heat-related blackouts in 2021, in addition to a subsequent state report figuring out renewable vitality didn’t cowl California’s wants but. Gov. Gavin Newsom signed the invoice into legislation in 2022.
As we speak, Diablo Canyon gives about 8% of the state’s whole vitality and about 17% of its carbon-free vitality.
The laws was uncommon in that it allowed PG&E to cost each its prospects and people of different utilities a charge for vitality the plant produces. The logic behind the transfer was that Diablo Canyon is a useful resource benefitting the whole state. However as a substitute of handing the specifics of the charge off to the California Public Utilities Fee, which generally oversees the sophisticated and deliberative means of ratemaking, it set the charge quantity straight in statute – $13 per megawatt hour.
Referred to as a “volumetric performance fee,” the cost is supposed to switch the return on funding PG&E would sometimes get for the plant and supply compensation for any potential legal responsibility from the elevated threat of operating an older plant. It’s forecasted by the utility to price, in 2026, $190.8 million for PG&E prospects, $59.7 million for Southern California Edison prospects, $12.9 million for San Diego Gasoline & Electrical prospects.
PG&E shareholders are explicitly prohibited from benefiting from the charges underneath the legislation.
However state utility regulators have to this point declined to require PG&E to supply sufficient element into the way it spends the charges to substantiate that shareholders really aren’t benefitting.
“California law requires that PG&E spend the volumetric performance fees to advance critical public-purpose priorities, including accelerating customer connections to the grid and reducing operational and system risk. State law also expressly prohibits profit by PG&E shareholders,” Jennifer Robison, spokesperson for PG&E, mentioned in an announcement. “Our proposal outlines detailed accounting mechanisms and controls that PG&E uses to demonstrate compliance with state law each year.”
Beneath the legislation, PG&E is anticipated to make use of the charges towards authorised bills at Diablo Canyon. If the charges aren’t wanted there, it could actually spend on six different classes meant to learn the general public. These embrace:
- Bringing new prospects’ energy on-line.
- Security for patrons and staff.
- Bringing extra renewable or zero-carbon vitality onto the grid.
- Lowering the carbon footprint of buildings.
- Grid resilience.
- Schooling and communication.
The proposed choice provides a couple of extra constraints. PG&E could be required to spell out what number of prospects profit from every venture it spends the charges on. It might additionally have to say how these tasks assist preserve buyer payments down, though a revision launched Tuesday lowered this requirement, permitting PG&E to not adjust to that side so long as it explains why.
PG&E can be anticipated to report how the charges had been spent in “major work categories,” predetermined buckets the utilities already use to categorize their spending for the fee. These buckets have a spending cap on them – if PG&E goes over the allotted quantity, shareholders pay for the overspend, and goes underneath, shareholders preserve the distinction.
However PG&E is barely required to report such classes during which the charge is used, stopping regulators from seeing the web impact on shareholders. The web impact is essential, the Utility Reform Community mentioned, as a result of PG&E may strategically use it to provide shareholders more cash general. And whereas PG&E would report all of these classes throughout its basic price case, that case solely occurs each 4 years, versus the annual submitting for the Diablo Canyon charge.
The Utility Reform Group proposed broader reporting on this to higher see the circulate of cash, which might permit the fee to higher see if prices shareholders usually cowl had been being funded with the Diablo Canyon charges. The fee agreed in its choice that the spending plans as set out don’t have sufficient element to find out this at present, however that such a requirement could be “overly complex if not infeasible or speculative analysis.”
A state evaluation famous that the laws had no “guardrails” stopping PG&E from utilizing the charges for bills that will have been paid by shareholders.
Concern concerning the charges getting used to learn shareholders was introduced up as early because the 2022 legislation’s inception. A state Meeting evaluation famous on the time that the laws had no “guardrails” stopping PG&E from utilizing the charges for bills that will have beforehand been paid for by shareholders, “thereby freeing up ratepayer dollars elsewhere for capital expenditures (PG&E) may earn a return on.”
Advocates additionally requested the fee to require that PG&E use the charges to cowl a predicted annual funds gap. PG&E is at present predicting an working loss on the plant of about $583 million on common every year.
The Utility Reform Community, the Alliance for Nuclear Accountability, and the Inexperienced Energy Institute requested the fee to require PG&E to make use of the charges to scale back this gap first earlier than allocating cash on different allowed public tasks. Lowering this deficit, they argued, would decrease payments for not simply PG&E prospects, however these of the opposite two main utilities which are charged the charge. Cash spent on the allowed public profit tasks, alternatively, solely advantages PG&E’s territory.
The fee declined, as a substitute saying it “strongly encourages PG&E to take their underlying reasoning into account as a guiding principle.”
PG&E has pushed again strongly in opposition to limitations on the way it spends the charges and reviews that spending, in addition to prior approval of its charge spending plans. It has additionally challenged limitations on its charge spending or mandates to show that its prices had been affordable. In a March remark filed with the fee, PG&E argued that having to report how the charges had been spent in main work classes went past the scope of the 2022 legislation. It additionally took the difficulty earlier than an appellate courtroom and the Supreme Courtroom of California, saying that by requiring it to spend in sure methods, the fee undermined the 2022 legislation and “called into question the economic viability of extended operations at Diablo Canyon.”
Each courts declined to take up PG&E’s case, and the fee denied the utility’s request to rethink its proposed choice.
This text was initially printed on CalMatters and was republished underneath the Artistic Commons Attribution-NonCommercial-NoDerivatives license.
