The California Public Utilities Commission has approved $722.6 million in ratepayer costs to cover the continued operation of the Diablo Canyon Power Plant — the state’s only functioning nuclear energy source.
The plant was scheduled to begin shutting down in November, but its lifespan was extended in a last-minute legislative deal struck by Gov. Gavin Newsom in 2022.
The extension was intended to ease California’s transition to green power and alleviate blackouts during periods of extreme heat, but now comes at a time when the energy demands of artificial intelligence and data centers are rapidly growing.
Although the plant is operated by Pacific Gas and Electric Co., the expense will be shared by customers of all three of the state’s investor-owned power companies — PG&E, Southern California Edison and San Diego Gas & Electric.
Thursday’s 4-1 approval by the governor-appointed commission provoked sharp criticism from consumer advocacy groups and nuclear power opponents.
“It’s unprecedented for the state to allow one utility to collect the costs of its generating resources from the customers of all three of the major utilities,” said Matthew Freedman, an attorney with The Utility Reform Network and the organization’s lead attorney on the Diablo case.
Some critics say the expense of extended operations, as well as the overall risks of nuclear power, make it a bad deal for California ratepayers. When legislators approved the extension, they authorized PG&E to collect a number of new fees from ratepayers.
The commission’s rulings “grant PG&E an enormous Christmas stocking stuffed with ratepayer money for the bloated extension of Diablo Canyon,” said David Weisman, legislative director at the Alliance for Nuclear Responsibility.
California residents pay some of the highest electricity rates in the country — nearly double the national average, according to the U.S. Energy Information Administration.
PG&E and nuclear advocates say the value the plant provides the entire state — including low carbon electricity and a reliable, nearly continuous base load of electricity — far outweighs the cost.
“Every day, Diablo Canyon produces enough safe, reliable, and affordable clean electricity to meet the energy needs of more than three million Californians, all while producing zero greenhouse gas emissions,” PG&E said in a statement.
The Legislature’s agreement with Newsom extends the life of Diablo Canyon’s Unit 1 through October 2029 and Unit 2 through 2030.
The total cost of extended operations through 2030 is now estimated at about $8.9 billion, but PG&E says this cost is more than offset by $1.2 billion in funding from the federal government, more than $5 billion in expected revenue from selling the plant’s power and an additional $6 billion in value to the state for providing consistent, reliable power.
The ratepayer costs that the CPUC approved Thursday will cover extended operations for both units through Dec. 31, 2025.
Although the total estimated cost for operating the plant during that period is more than $1.3 billion, PG&E expects to make about $624 million to offset ratepayer costs through the sale of electricity in the energy market.
As California works to build significant new wind and solar power, Diablo Canyon remains competitive with both renewable technologies — which have seen significant cost reductions in the last two decades.
Solar and wind cost about $60 and $50 per megawatt-hour, respectively, but the cost of battery storage to offset the intermittency of sunshine and wind brings their costs up to about $135 and $89 per megawatt-hour, according to an analysis by the financial and energy consulting firm Lazard.
PG&E has projected a base cost of about $43.60 per megawatt-hour to operate and maintain the plant in extended operations through 2025, according to CPUC filings. However — when additional costs are factored in, including fees authorized by the 2022 law — the total cost comes to $111.21 per megawatt-hour.
Since this period represents a transition into extended operations, PG&E says these numbers do not represent the average costs of Diablo’s extended life through 2030.
In 2026 for example, the first year in which both reactors will be operating in extended operations all 12 months, PG&E projects an operation and maintenance cost of $32.62 per megawatt-hour and a total cost of $75.91 per megawatt-hour.
Nuclear facilities beyond their originally designed lifetime typically cost around $32 per megawatt-hour, the Lazard analysis found.