CPUC approves Diablo Canyon retirement, 15 EV pilots, storage RFO to replace gas

Dive Brief:

The California Public Utilities Commission on Thursday voted 5-0 to retire Diablo Canyon, the last nuclear plant in the state. Regulators will allow Pacific Gas & Electric to recover $241.2 million for retirement costs, most of which will go towards employ retention.
The commission rejected an $85 million request for a Community Impact Mitigation Program that had been agreed to by the utility and community stakeholders in San Luis Obispo, where the plant is located. Regulators also rejected PG&E's plan to replace the plant's capacity with renewable energy and storage, saying replacement resources will be determined in its integrated resource plan (IRP).
In a separate proceeding, the commission approved 15 utility pilot projects aimed at accelerating the transition towards electrified transportation, with particular emphasis on heavy duty and fleet vehicles. Regulators also authorized PG&E to issue a request for offers (RFO) for battery storage projects to replace three gas plants that don't have long-term contracts but are needed for local reliability.

Dive Insight:

The CPUC opens its meetings with a public comment period, and on Thursday more than a dozen people signed up for two minutes at the mic. Several commenters focused on how the EV and Diablo Canyon orders might benefit disadvantaged communities.

The tone of the comments meant that when Commission President Michael Picker gave an overview of the Diablo Canyon decision regulators would soon vote on, he was almost apologetic when explaining why $85 million for community mitigation had been denied.

"The question is not whether there will be financial impacts or if PG&E ratepayers should be paying for them," Picker said. "In the absence of legislative authorization, the community impacts mitigation program is not approved. Utility rates should be used to provide utility services and not government services."

Other members echoed those comments. Commissioner Martha Guzman Aceves acknowledged the community and the impacts the plant's closure would have. But she added, "this is an area that needs very clear legislation direction."

Guzman Aceves also said employee retention was a significant part of the closure, and that would help to ease the transition. Skilled workers will be retained for the next seven years.

The operating license for Diablo Canyon Unit 1 expires in 2024 and Unit 2 expires in 2025.

On the last major issue in the decision, regulators said they would not mandate that electricity replacing Diablo Canyon come from renewables, and they said that question should be asked during the commission's Integrated Resources Procurement proceeding. But they did specify that greenhouse gas emissions could not rise substantially, and commissioners reiterated that they were in no way backing down from aggressive climate goals.

In the order, regulators tell PG&E that during the IRP proceeding the utility "should be prepared to present scenarios assuming Diablo Canyon retirement dates prior to 2024/2025, including ones that demonstrate no more than a de minimis increase in the greenhouse gas emissions of its electric portfolio."

"It is the intent of the Commission to avoid any increase in greenhouse gas emissions resulting from the closure of Diablo Canyon," the commission wrote in its decision, underlining the sentence for emphasis.

PG&E issued a statement following the decision, saying the utility was "disappointed" regulators had shrunk the size of the employee retention, nixed the community fund and, and other points.

"Since the full proposal was not approved, in line with our agreement, PG&E will be meeting to confer with our labor, community and environmental group partners in the days ahead about the decision, our next steps and the path forward," the utility said.

Electrified transportation

Separately, the commission approved 15 pilot programs aiming to accelerate the transition towards electrified transportation. The projects are "the first of their kind," said Commissioner Carla Peterman.

The commission issued an order requesting the utilities file the pilots in response to legislation passed in 2015 calling for the advance of widespread transportation electrification in California.

The projects are aimed at maximizing benefits to disadvantaged communities by "catalyzing electrification of buses, trucks, and other transportation vehicles in locations that can have the biggest impact on air quality standards," Peterman said in a statement.

With some modifications, the order approved four Pacific Gas & Electric Company projects; five Southern California Edison projects; and six from San Diego Gas & Electric.

All of the projects are fairly nimble — they all cost less than $4 million to implement and take less than a year to implement. And $1.7 million will be set aside for evaluation after the pilot programs are complete.

Projects include electrification of school buses, delivery trucks, airport/seaport equipment, truck stops, and commuter locations. Fast chargers will also be installed in urban locations and the there will be incentives for car dealerships.

The Sierra Club hailed the decision as a win for the state. California's regulators, utilities and stakeholders "continue to set the standard for creative and impactful vehicle electrification projects," Sierra Club Attorney Joe Halso said in a statement. "These programs will begin to unlock the full potential of electrification, particularly in the medium- and heavy-duty vehicle sectors, where emissions from fossil fuel-powered vehicles threaten the health of millions of Californians."

PG&E will consider storage to replace 3 gas plants

The commission also passed an order directing PG&E to solicit bids for clean energy resources to replace three expensive has plants in Northern California, and to specifically consider storage.

Owned by Calpine, the Feather, Yuba and Metcalf plants don't have long-term contracts but are needed for local reliability. Calpine and the California ISO have requested federal regulators approve a reliability-must-run (RMR) designation for plants, which would run them on a more expensive cost-of-service basis.

Both the CPUC and PG&E have opposed using RMR contracts for a variety of reasons, including market distortions, cleaner alternatives and higher rates.

To that end, the commission issued an order authorizing PG&E to issue an RFO for battery storage or other
preferred resources to replace the three plants. The competitive solicitation will address two local sub-area capacity deficiencies in the Pease and South Bay-Moss Landing subarea, and manage a high voltage in the Bogue subarea.

Energy storage to replace generation is a strategy California is familiar with. In 2016, the commission directed Southern California Edison to conduct an expedited procurement to address the Aliso Canyon gas leak and resulting generator shortages.

Three years before that, the commission required the utility to procure some storage and other alternative resources, related to the closure of the San Onofre nuclear plant. SCE wound up far exceeding it the target, procuring 260 MW of storage when it was directed to find 50 MW.