Pacific Gas & Electric (PCG)

Diablo Canyon Nuclear Power Plant 

               As previously disclosed, at the projected level of operation for the Utility’s two nuclear facilities at the Diablo Canyon nuclear power plant (Diablo Canyon), the Utility's current facilities are able to store on-site all spent nuclear fuel produced through approximately 2007.  On November 21, 2005, the Utility received a license issued by the Nuclear Regulatory Commission (NRC) authorizing the Utility to install a temporary storage rack in each unit's existing spent fuel storage pool that would permit the Utility to operate Unit 1 until 2010 and Unit 2 until 2011.  The Utility anticipates that it would complete the installation of the temporary storage racks by December 2006.  The Utility is waiting for the U.S. Court of Appeals for the Ninth Circuit to issue a decision on the appeal filed by several interveners challenging the NRC's March 2004 decision to authorize the Utility to operate a dry cask storage facility at Diablo Canyon to store spent nuclear fuel through approximately 2021 for Unit 1 and to 2024 for Unit 2.  A decision is anticipated in late 2005 or the first quarter of 2006.  Construction of the on-site dry cask storage facility began in the third quarter of 2005 and is expected to be completed by 2008.  If the Utility is unable to complete the dry cask storage facility, or if construction is delayed beyond 2010, and if the Utility is otherwise unable to increase its on-site storage capacity, it is possible that the operation of Diablo Canyon may have to be curtailed or halted as early as 2010 with respect to Unit 1 and 2011 with respect to Unit 2 and until such time as additional spent fuel can be safely stored.  If electricity from Diablo Canyon were unavailable, the Utility would be required to purchase electricity from other more expensive sources to meet its customers' demand. 

Dated:  December 2, 2005