Testimony of Mark Tony of TURN on Diablo Extension

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Mark Toney – TURN – The Utilities Reform Network

Assembly Hearing – 8-25-2022


Re: SB 846 

Diablo Canyon powerplant: extension of operations


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Chair Garcia (00:00):

Mark Tony, floor is yours. Dr. Tony.

Mark Tony (00:11):

Thank you. Thank you Chair Garcia and members of the committee. My name is Mark Tony. I serve as Executive Director of TURN, The Utility Reform Network. TURN understands that California has an energy reliability crisis. We also understand that California families are facing an energy affordability crisis, which this committee has had a hearing on earlier this year and we appreciate that. TURN is concerned that the governor’s proposal, that the terms of the proposal to extend Diablo Canyon Operation is a terrible deal that is going to enrich PG&E shareholders at the expense of residential, commercial, and industrial rate payers across the state, and will make the affordability crisis even worse by increasing monthly bills.

Mark Tony (01:13):

I don’t need this up right now. Thank you very much. I’ll let you know. So, the first concern is that rate payer bills will skyrocket. So, there is in this deal, a fixed management fee of a hundred million dollars a year starting in 2025. It’s collected by a non-bypassable charge on all customers in California investor owned service territories, PG&E, Edison, San Diego Gas and Electric. It includes all CCAs and all direct access customers, these funds are dedicated to PG&E shareholder profits. Two, there’s a volumetric fee of $20 per megawatt hour for production starting in 2025, estimated at $360 million a year based on historic generation levels. 50% of this volumetric fee is collected by the non-bypassable charge on customers across the state. The funds are dedicated to PG&E shareholder profits. The actual costs of the Diablo Canyon Operations will be billed to customers and exempted from CPUC Reasonableness Reviews, that concerns us.

Mark Tony (02:47):

So, starting in 2025, all Diablo Canyon costs, capital, operations, fuel, insurance, taxes, pension benefits, mitigation fees, fuel storage will be collected from electricity customers all across the state. And there are no mechanisms for constraining costs or limiting the liability of PG&E to recover unlimited spending on Diablo Canyon in electricity rate. I’m going to move to concern about windfall profits for PG&E shareholders. My first concern is that PG&E shareholders would be unreasonably insulated from liability for the first $300 million of cost stemming from outages caused by mismanagement. In 2020 and 2021, Diablo Canyon suffered almost 150 days of outages due to operational problems at unit two, resulting in replacement power costs of $179 million. Under current rate making, PG&E may be responsible for these costs if they’re found to be negligent. But under the governor’s proposal, rate payers would be liable for future outage causes even if the outage is caused by PG&E improvements, mismanagement, or negligence.

Mark Tony (04:28):

Now, I’m going to ask for page three of my presentation to be put up because I’m going to talk about the annual profits that PG&E is. So yes, if you can go to page, okay, here we go. This is it. So, what this shows is that okay from 2017 to 2021, PG&E shareholders collected about $160 million a year. Now it’s slated to go down in ’23 through ’25 to about $140 million a year. But under this new proposal, the governor’s proposal, there would be an additional $204 million on top of that of shareholder profits. And then when you get to 2026 to 2030, that goes up to $468 million a year. We just can’t figure out why PG&E shareholders should be getting so much more per year in profits for extending the plant.

Mark Tony (05:42):

Can you go to the next one, please? Thank you. I appreciate it. So, what this chart does is it shows the cumulative amount that of shareholder profits being collected. Now by 2025, underneath the current PG&E shareholders would collect about $350 million. Okay. And that stays the same for 2030 because the plant would be shut down, there’s no additional collection. But according to the terms of this plan that you see before you, by 2025 that $350 balloons to $962 million. And if you add up all of the profits year after year, by 2030 we’re talking about over $3 billion, that’s real money. Thank you very much. Those are my two slides.

Mark Tony (06:52):

My final point is going to be to share with the committee key principles for extending Diablo Canyon. That is fair to rate payers, fair to taxpayers, and also fair to shareholders without giving them windfall profits. Principle one, treat affordability as equally important as reliability. Two, no windfall profits for PG&E shareholders. Cap future annual shareholder profits from Diablo Canyon at 2023 to ’25 levels, which is no more than $140 million per year. Three, hold PG&E accountable for mismanagement or negligent if the plant goes down. Eliminate shareholder protections for replacement power cost. Four, preserve the integrity of the CPUC Reasonableness Review of all costs for operating the plant and retain exparte rules for transparency. There isn’t the governor’s proposal, a suspension of exparte rules in the first stage of the proceeding, that’s just wrong, we need transparency.

Mark Tony (08:26):

Five, protect rate payers from additional monthly bills due to keeping the Diablo Canyon open. Six, allocate any surplus funds from selling power to offset and reduce rate payer costs in recognition of tens of billions of dollars already invested in Diablo Canyon, do not let PG&E use excess funds as a slush fund to do what they want without CPUC Review, that’s important. Seven, take the time necessary, please as policy makers, to understand the consequences of the governor’s proposal and remedies to ensure the greatest public benefit financially and as a backup resource. And finally, defer action on the big question of who pays and who profits from Diablo Canyon until January to provide the legislature with sufficient time to get independent analysis. Thank you very much.

Chair Garcia (09:38):

Thank you, sir. We have our last presenter and we will jump right into questions after that.