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PCG » Topics » The operation and decommissioning of the Utility's nuclear power plants expose it to potentially significant liabilities and capital expenditures.This excerpt taken from the PCG 10-Q filed Nov 6, 2008. The operation and
decommissioning of the Utility's nuclear power plants expose it to potentially
significant liabilities and capital expenditures that it may not be able to
recover from its insurance or other source, adversely affecting its financial
condition, results of operations, and cash flow” is updated as follows to
reflect the new date that the Utility expects it will begin loading spent fuel
into the dry cask storage facility:
Because
the U.S. Department of Energy has failed to develop a permanent national
repository for the nation's spent nuclear fuel and high-level radioactive waste
produced by the nation's nuclear electric generation facilities, the Utility has
been storing spent nuclear fuel and high-level radioactive waste resulting from
its nuclear operations at Diablo Canyon nuclear generating facilities (“Diablo
Canyon”) in on-site storage pools. The Utility believes that the
existing spent fuel pools at Diablo Canyon have sufficient capacity to enable
the Utility to operate Diablo Canyon until October 2010 for Unit 1 and May 2011
for Unit 2. The Utility is also constructing a dry cask storage
facility at Diablo Canyon to store spent nuclear fuel which it expects to
complete by the end of 2008.
Although
the Utility expected to begin loading spent nuclear fuel in 2008, the Utility
currently expects that the dry cask storage facility and modifications to the
power plant to support dry cask storage processing will be completed in late
2008 and that the initial movement of spent nuclear fuel into dry storage will
begin in June 2009. If the Utility is unable to complete the facility
and load spent fuel into the dry cask storage facility by October 2010 for Unit
1 or May 2011 for Unit 2, the Utility would have to curtail or halt operations
of the unit until such time as additional safe storage for spent fuel is made
available.
On
October 23, 2008, the Nuclear Regulatory Commission ("NRC") issued an order
rejecting the final contention made by a party who had appealed the NRC’s 2004
decision to grant the Utility a license to construct the dry cask storage
facility. The NRC concluded that the NRC staff’s supplemental environmental
assessment, which concluded there would be no significant environmental impacts
from potential terrorist acts directed at the dry cask storage facility, was
supported by a reasonable analysis. Any party wishing to appeal the NRC’s order
must file a notice of appeal within 60 days.
The
discussion under the heading “Management’s Discussion and Analysis of the
Financial Condition and Results of Operations - Risk Factors” in the
2007 Annual Report under the following caption This excerpt taken from the PCG 8-K filed Oct 28, 2005. The operation and decommissioning of the Utility’s nuclear power plants expose it to potentially significant liabilities and capital expenditures.
The operation and decommissioning of the Utility’s nuclear power plants expose it to potentially significant liabilities and capital expenditures, including those arising from the storage, handling and disposal of radioactive materials and uncertainties related to the regulatory, technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives. The Utility maintains decommissioning trusts and external insurance coverage to reduce the Utility’s financial exposure to these risks. However, the costs or damages the Utility may incur in connection with the operation and decommissioning of nuclear power plants could exceed the amount of the Utility’s insurance coverage and other amounts set aside for these potential liabilities. In addition, as an operator of two operating nuclear reactor units, the Utility may be required under federal law to pay up to $201.2 million of liabilities arising out of each nuclear incident occurring not only at the Utility’s Diablo Canyon power plant but at any other nuclear power plant in the United States.
In January 2004, the Utility filed an application with the CPUC seeking approval of projects to replace turbines and steam generators and other equipment at the two nuclear operating units at the Utility’s Diablo Canyon nuclear power plant and authorization to recover the projected $706 million capital expenditures in rates. The Utility plans to replace Unit 2’s steam generators in 2008 and to replace Unit 1’s steam generators in 2009. On January 25, 2005, a CPUC administrative law judge issued a proposed decision that would find the steam generator replacement project to be cost-effective and would authorize the Utility to recover the projected $706 million capital cost of the project in rates with no after-the-fact reasonableness review if the total costs do not exceed $706 million, and established a maximum project cost of $815 million. If the project costs exceed $706 million, or if the CPUC has reason to believe that the costs may be unreasonable regardless of the amount, the CPUC may conduct a reasonableness review of all costs. The proposed decision recommends that the Utility would be allowed to recover the revenue requirements related to the project in rates beginning on January 1 of the year following the commencement of commercial operations of each unit. The CPUC may act on the proposed decision at its meeting to be held on February 25, 2005. Assuming the CPUC approves the proposed decision, the Utility would make the initial capital expenditures required to maintain a 2008/2009 implementation schedule. It is expected that the CPUC will issue a final decision, including incorporation of the environmental impact review for the projects, in September 2005. If the Utility cannot recover any material amount of these excess costs or damages in the Utility’s rates in a timely manner, PG&E Corporation’s and the Utility’s financial condition and results of operations would be materially adversely affected.
In addition, the NRC has broad authority under federal law to impose licensing and safety-related requirements upon owners and operators of nuclear power plants. In the event of non-compliance, the NRC has the authority to impose fines or to force a shutdown of the nuclear plant, or both, depending upon the NRC’s assessment of the severity of the situation. Safety and
security requirements promulgated by the NRC have, in the past, necessitated substantial capital expenditures at the Utility’s Diablo Canyon power plant and additional significant capital expenditures could be required in the future.
If the Utility fails to increase the spent fuel storage capacity at the Utility’s Diablo Canyon power plant by the spring of 2007 and there are no other available spent fuel storage or disposal alternatives, the Utility would be forced to close this plant and would therefore be required to purchase electricity from more expensive sources.
Under the terms of the NRC operating licenses for the Utility’s Diablo Canyon power plant, there must be sufficient storage capacity for the radioactive spent fuel produced by this plant. Under current operating procedures, the Utility believes that its Diablo Canyon power plant’s existing spent fuel pools have sufficient capacity to enable it to operate until the spring of 2007. Although the Utility is taking actions to increase the Diablo Canyon power plant’s spent fuel storage capacity and exploring other alternatives, there can be no assurance that the Utility can obtain the final necessary regulatory approvals to expand spent fuel capacity or that other alternatives will be available or implemented in time to avoid a disruption in production or shutdown of one or both units at this plant. As the proposed permanent spent fuel depository at Yucca Mountain, Nevada will not be available by 2007, there will not be any available third-party spent fuel storage facilities. If there is a disruption in production or shutdown of one or both units at this plant, the Utility will need to purchase electricity from more expensive sources.
This excerpt taken from the PCG 10-K filed Feb 18, 2005. The operation and decommissioning of the Utility's nuclear power plants expose it to potentially significant liabilities and capital expenditures. The operation and decommissioning of the Utility's nuclear power plants expose it to potentially significant liabilities and capital expenditures, including those arising from the storage, handling and disposal of radioactive materials and uncertainties related to the regulatory, technological and financial aspects of decommissioning nuclear plants at the end of their licensed lives. The Utility maintains decommissioning trusts and external insurance coverage to reduce the Utility's financial exposure to these risks. However, the costs or damages the Utility may incur in connection with the operation and decommissioning of nuclear power plants could exceed the amount of the Utility's insurance coverage and other amounts set aside for these potential liabilities. In addition, as an operator of two operating nuclear reactor units, the Utility may be required under federal law to pay up to $201.2 million of liabilities arising out of each nuclear incident occurring not only at the Utility's Diablo Canyon power plant but at any other nuclear power plant in the United States. In January 2004, the Utility filed an application with the CPUC seeking approval of projects to replace turbines and steam generators and other equipment at the two nuclear operating units at the Utility's Diablo Canyon nuclear power plant and authorization to recover the projected $706 million capital expenditures in rates. The Utility plans to replace Unit 2's steam generators in 2008 and to replace Unit 1's steam generators in 2009. On January 25, 2005, a CPUC administrative law judge issued a proposed decision that would find the steam generator replacement project to be cost-effective and would authorize the Utility to recover the projected $706 million capital cost of the project in rates with no after-the-fact reasonableness review if the total costs do not exceed $706 million, and established a maximum project cost of $815 million. If the project costs exceed $706 million, or if the CPUC has reason to believe that the costs may be unreasonable regardless of the amount, the CPUC may conduct a reasonableness review of all costs. The proposed decision recommends that the Utility would be allowed to recover the revenue requirements related to the project in rates beginning on January 1 of the year following the commencement of commercial operations of each unit. The CPUC may act on the proposed decision at its meeting to be held on February 25, 2005. Assuming the CPUC approves the proposed decision, the Utility would make the initial capital expenditures required to maintain a 2008/2009 implementation schedule. It is expected that the CPUC will issue a final decision, including incorporation of the environmental impact review for the projects, in September 2005. If the Utility cannot recover any material amount of these excess costs or damages in the Utility's rates in a 61 timely manner, PG&E Corporation's and the Utility's financial condition and results of operations would be materially adversely affected. In addition, the NRC has broad authority under federal law to impose licensing and safety-related requirements upon owners and operators of nuclear power plants. In the event of non-compliance, the NRC has the authority to impose fines or to force a shutdown of the nuclear plant, or both, depending upon the NRC's assessment of the severity of the situation. Safety and security requirements promulgated by the NRC have, in the past, necessitated substantial capital expenditures at the Utility's Diablo Canyon power plant and additional significant capital expenditures could be required in the future. If the Utility fails to increase the spent fuel storage capacity at the Utility's Diablo Canyon power plant by the spring of 2007 and there are no other available spent fuel storage or disposal alternatives, the Utility would be forced to close this plant and would therefore be required to purchase electricity from more expensive sources. Under the terms of the NRC operating licenses for the Utility's Diablo Canyon power plant, there must be sufficient storage capacity for the radioactive spent fuel produced by this plant. Under current operating procedures, the Utility believes that its Diablo Canyon power plant's existing spent fuel pools have sufficient capacity to enable it to operate until the spring of 2007. Although the Utility is taking actions to increase the Diablo Canyon power plant's spent fuel storage capacity and exploring other alternatives, there can be no assurance that the Utility can obtain the final necessary regulatory approvals to expand spent fuel capacity or that other alternatives will be available or implemented in time to avoid a disruption in production or shutdown of one or both units at this plant. As the proposed permanent spent fuel depository at Yucca Mountain, Nevada will not be available by 2007, there will not be any available third-party spent fuel storage facilities. If there is a disruption in production or shutdown of one or both units at this plant, the Utility will need to purchase electricity from more expensive sources. | EXCERPTS ON THIS PAGE:
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