California lawmakers, governor at odds over Diablo Canyon funding

June 11, 2024, 3:01PMNuclear News
Gov. Gavin Newsom visits Diablo Canyon in this 2023 photo (Source: Governor’s office)

In budget discussions conducted last week, the California legislature rejected a $400 million budget item to help keep the state’s sole remaining nuclear plant operational.

Diablo Canyon—owned by Pacific Gas & Electric—has been the subject of much debate in California. To meet grid demands during a record hot summer in 2022, Gov. Gavin Newsom had cut a deal to give $1.4 billion to support continued operations at the 2,200-MWe nuclear facility.

At the time of the deal, Newsom argued that allowing Diablo Canyon to provide electricity until 2030 is needed to preserve grid reliability as California transitions to renewable energy and weans itself off fossil fuels, according to reporting from the Sacramento Bee. At that time, California had a budget surplus, but the deficit lawmakers face this year is forcing tough decisions on spending in the state.

Background: Diablo Canyon, located near Avila Beach in San Luis Obispo County, generates about 9 percent of the state’s total electricity and 17 percent of California’s zero-carbon energy.

Diablo Canyon’s two units came on line in 1985 and 1987, respectively. The California Public Utilities Commission granted a five-year license extension this past December, which allows PG&E to operate Unit 1 until Oct. 31, 2029, and Unit 2 until Oct. 31, 2030, while the U.S. Nuclear Regulatory Commission considers a 20-year license extension for the plant.

Funding debate: Lawmakers built momentum in recent weeks to oppose the governor’s $400 million earmark for Diablo Canyon as one cut to Newsom’s $2.88 billion budget proposal, raising raised concerns that the state may never get repaid for hundreds of millions provided to PG&E for continued plant operations.

PG&E had been preparing to shut down Diablo Canyon in 2025, but at the Newsom’s urging for a $1.4 billion aid package in 2022, Senate Bill 846 authorized $600 million from the state’s general fund to keep the plant open. That measure said plans would be made later to approve the remaining funding.

PG&E was expected to repay the state loan with a federal grant from the Department of Energy. However, of the $1.1 billion ultimately provided by the grant, only $741 million can be used to cover expected operating losses at the plant through 2026. The other $359 million will not be provided unless PG&E demonstrates an unscheduled outage.

The legislature must pass a budget by June 15, an agreement that could serve as a placeholder while leaders continue to negotiate with Newsom. The governor must sign the budget bill by June 27.

Quotable: “It feels like we’re being taken advantage of here,” said Sen. Benjamin Allen (D., 24th Dist.) in a budget committee hearing last month. “A lot of the terms that we were sold have not been fulfilled by the [Newsom] administration. We were all asked to support it although many of us didn’t want to . . . and now we’re being asked for this loan with conditions I’m not clear on.”

Allen called Newsom’s arrangement with PG&E back in 2022 a “last-second, stinky political deal.”

Budget committee chair Scott Wiener (D., 11th Dist.) said that more information is needed about how PG&E has spent hundreds of millions already loaned by the state. “We believe it is poor financial judgment to provide a loan of this magnitude to an investor-owned utility without having basic loan repayment information,” Wiener wrote in a letter to the Department of Finance.

The governor’s office has not commented on the issue.

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