Newsom wants to keep Diablo Canyon nuclear power plant open by loaning PG&E $1.4 billion

California Gov. Gavin Newsom is proposing to loan PG&E $1.4 billion to extend the life of Diablo Canyon nuclear power plant north of Avila Beach.

The draft legislation — which would be attached to the state’s budget as a trailer bill — would help extend the power plant’s operations for an additional five to 10 years beyond its scheduled shutdown dates in 2024 and 2025. The forgivable loan, if authorized, would be lent by the state’s Department of Water Resources.

Diablo Canyon — California’s last remaining nuclear power plant — generates about 8.6% of the state’s total electricity supply, according to the Governor’s Office.

Keeping the plant open is “critical to ensure statewide energy system reliability and to minimize the emissions of greenhouse gasses while additional renewable energy resources come online,” the draft legislation, released on Aug. 11, says. “Accordingly, it is the policy of the Legislature that extending the Diablo Canyon Power Plant’s operations for a renewed license term is prudent, cost-effective and in the best interests of all California electricity customers.”

The draft legislation is careful to note that the state would “continue to act with urgency” to bring renewable energy power sources online to comply with state goals. This includes accelerating efforts to bring offshore wind energy to areas such as the Central Coast, and exploring other alternative energy production and storage projects.

“PG&E is committed to California’s clean energy future, and as a regulated utility, we are required to follow the energy policies of the state. We understand state leaders’ discussions to potentially extend operations at (Diablo Canyon) are progressing,” PG&E spokesperson Lynsey Paulo wrote in an emailed statement to The Tribune. “We are proud of the role that (Diablo Canyon) plays in our state, and we stand ready to support should there be a change in state policy, to help ensure grid reliability for our customers and all Californians at the lowest possible cost.”

Reaction to governor’s proposal

Assemblyman Jordan Cunningham, R-San Luis Obispo, has long been a champion of keeping the power plant open. He noted that the state needs Diablo Canyon’s energy as it works to achieve its renewable energy goals.

“The soonest any offshore wind power is going to be put to use in the grid is probably 2030, from what I’ve been told,” he said. “So we’ve got a real gap from 2025 to 2030. If you could extend Diablo to help meet some of that gap, then you’re displacing mostly natural gas power.”

“The reality is, when they made that decision in 2016, we assumed we’d be a certain place with renewables and storage, and we’re just not there,” he added.

Others, however, worry that continuing the plant’s operations will likely be incredibly expensive beyond any upfront costs offset by state and federal contributions.

“Nothing in the bill as drafted really refers to the cost of where they’re going to get the money to operate the plant for the 10 years beyond its expiration date,” said Andrew Christie, director of the Sierra Club Santa Lucia Chapter. “So where’s that money?”

What it would take to extend plant’s licenses

Extending the plant’s life would require relicensing through the Nuclear Regulatory Commission, which could be a lengthy process because of the extensive safety and environmental reviews required.

However, Newsom’s draft legislation proposes exempting the extension from the California Environmental Quality Act. And it prohibits any new environmental review the California Coastal Commission would have conducted to ensure that continuation of the plant’s operation would follow state environmental laws.

The draft bill asserts that keeping Diablo Canyon open would “entail no material operational or physical changes and no new or materially different adverse environmental impacts.”

The plant’s once-through cooling system to keep the nuclear reactors from overheating sucks in and spits out billions of gallons of seawater each day. Such process has caused significant changes to the marine ecosystem in the Pacific Ocean surrounding the plant and puts the plant out of compliance with state water quality laws and the power plant’s permit.

To work through that, Newsom’s draft legislation proposes extending PG&E’s deadline to comply with state water laws and its permit to Oct. 31, 2035.

Additionally, beginning in 2024, the utility company would be required to pay a “mitigation fee” of $10 for each million gallons of ocean water used with a 3% annual increase each subsequent year.

PG&E’s current estimated payment to the mitigation fund is about $38 million for the power plant’s operating years 2015 through 2025, according to the state water board.

Discontinuing operations at Diablo Canyon would cause a dramatic change in the marine ecosystem and a return to the “natural cold water conditions,” which the water board would not consider a violation of PG&E’s permit requirements, according to the state water board.

Legislation would be needed to apply for federal money

PG&E has indicated interest in applying for funds from the $6 billion U.S. Department of Energy’s Civil Nuclear Credit program, which provides energy companies with money to continue operating nuclear power plants that otherwise were slated for closure.

The utility may not qualify for those funds, however, and must submit an application by Sept. 6.

“Passage of legislation providing a pathway to relicensing is necessary before PG&E would be able to submit this (federal) funding application,” a draft fact sheet released Aug. 11 by Newsom’s office says. The legislative session ends on Aug. 31.

Release of the draft legislation comes just ahead of a public workshop on Friday led by the California Energy Commission, the Governor’s Office and the California Independent System Operator too discuss the “role that the Diablo Canyon Power Plant could have in supporting mid-term electric reliability and California’s clean energy transition.”

The workshop is scheduled for Friday from 4 to 7 p.m.

This is a breaking story and will be updated.