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Diablo Settlement will cost Ratepayers $50 Billion!

Abalone Alliance Press Release December 19, 1988


On December 19, 1988 the California Public Utilities Commission (PUC) decided to give Pacific Gas & Electric (PG&E) a $50 billion Christmas present in the form of a 30 year operating contract for PG&E's Diablo Canyon nuclear power facility near San Luis Obispo. The deal was secretly cut between PG&E, the PUC staff, and the state attorney general during the th year of the state's largest ever legal hearing over who should pay for Diablo.

The contract does the following:

  • It sets a state precedent as the first unregulated contract in California regulatory history for a utility monopoly.
  • It sets several national precedents as being the first deregulated contract for a nuclear power facility as well as being the first for electric utilities of this size since the early 1930's.
  • The contract allows rates to start at over $1 billion per year, with a yearly escallation of 11% through 1994. The republican controlled PUC has carefully constructed this giant rate increase by quietly doing it in small sums since 1985.
  • The performance based aspect of the contract will motivate PG&E to run Diablo as much as possible. The more they run it the more money they will make. Implications of endangering the public's safety were PR'd away with the addition of a safety committee. The hidden trick in this though is that PG&E and other nuclear allies at U.C. Berkeley can block nomination of individuals to the safety committee who they do not want on the committee.
  • The contract guarantees rates for Diablo Canyon to start at 7.8 cents per kilowatt hour and escalate to well over 20 cents per kilowatt hour within 30 years. The Rancho Seco reactor near Sacramento was nearly closed down in 1988 when operating costs there reached 6 cents per kilo watt hour. Costs to ratepayers will be over $15,000 each if the reactors operate for 30 years.
  • The contract legally erases the ugly side of the 22 year construction history at Diablo Canyon. If a serious accident were to ocurr at Diablo in the future it would be nearly impossible to relitigate as many of those involved are now dying off due to old age.
  • The contract allows PG&E to receive an immediate $1 billion tax writeoff.

  • The PUC refused to ignore over $1.5 billion that Ronald Reagan's EPA loaned at near zero interest rates to bale out the utility. The money was given as grants for "pollution control" i.e. construction of the containment vessels.
  • The contract forces PG&E to front up to $1 billion per year for up to 3 years to pay for any major repairs at Diablo. Ratepayers would be required to pay for all costs above this (THE MAJOR REPAIR CLAUSE).
  • The contract throws away nearly all of the $10 million that the state of California used in preparation of their original proposal calling for PG&E to pay $4.4 billion of the construction costs.
  • The contract allows PG&E to walk away with up to $3 billion, besides any money collected in rates, if the the reactors are abandoned at some point in the future.

The proposed settlement is a travesty to the ratepayers of California and should be stopped. We are calling on ratepayers to start a rate protest against this horrible deal. Call us for details.

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