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2011

Other Budget Issues

Further Detail

 Governor’s January Budget Proposal. The Governor’s January budget requested $500,000 for the CPUC to contract for consultant services to review Pacific Gas and Electric's (PG&E's) seismic study of Diablo Canyon Power Plant.

2006 Legislation Required California Energy Commission (CEC) to Assess the Vulnerability of California’s Nuclear Power Plants to Seismic Activity. Chapter 722, Statutes of 2006 (AB 1632, Blakeslee) charged the CEC with evaluating (in terms of disruption to the state’s electricity supply, costs and impacts to public safety, and impacts of nuclear waste) the impact of a major seismic disruption to the state’s two nuclear facilities: Diablo Canyon Power Plant and San Onofre Nuclear Generating Station. In order to comply with its statutory mandate, the CEC formed a Seismic Vulnerability Advisory Team, an interdisciplinary team of state agencies and consultants that included the Department of Conservation’s California Geological Survey, the Seismic Safety Commission and the Coastal Commission.

The CEC’s AB 1632 Report was completed and published in November 2008 and was included in the Commission’s 2008 Integrated Energy Policy Report. The report considered seismic hazards and vulnerability of nuclear plant sites, structures, and spent storage facilities. Based on its assessment, it made policy recommendations which included a recommendation for PG&E to do three-dimensional seismic studies of the vicinity surrounding Diablo Canyon Power Plant.

Diablo Canyon Power Plant Will Soon Need To Renew Its Operating License. The U.S. Nuclear Regulatory Commission (NRC) has regulatory authority over the radiological safety aspects of nuclear power, including plant licensing and license extensions. It is however left to state regulatory agencies to determine whether it is in the best interest of ratepayers and cost effective to continue operation of the state’s nuclear plants. In order to determine if continued operation is cost-effective and in the best of interest of ratepayers, the CPUC requires IOUs to complete a license renewal feasibility study.  

As part of a 2007 rate case which included proceedings on PG&E’s license renewal feasibility study, CPUC required PG&E to comply with the CEC’s AB 1632 recommendation to conduct a three-dimensional seismic study of the vicinity surround Diablo Canyon Power Plant.  

CPUC Has No Seismic Technical Expertise But Would Like to Review PG&E's Study. CPUC lacks the technical expertise to interpret the study which they have required of PG&E. Nonetheless, they would like to review the study. As such, the CPUC is seeking approval for funds to contract with a third-party consulting firm to review PG&E’s study.

Department of Conservation’s California Geological Survey (CGS) Is State’s Expert In Earthquake Hazards Studies and Has Technical Expertise to Review PG&E Study. Geologists at CGS prepare the definitive maps of faults in California, including the 2010 Fault Activity Map of California and maps of Alquist-Priolo Earthquake Fault Zones, where building is regulated due to the potential for fault rupture of the ground surface. CGS prepares seismic hazard estimates based on CGS fault mapping as well as earthquake history and fault slip rates. The seismic hazard model prepared jointly by CGS, U.S. Geological Survey and others represents a consensus of scientific opinion on the potential for earthquakes throughout California. CGS uses this seismic hazard model as a basis for comparison for numerous peer reviews of reports by geologists or geophysicists who recommend seismic design parameters for construction projects. In our view, CGS has qualified technical staff necessary to review PG&E’s seismic study, based on its extensive technical knowledge and expertise in the area of seismic activity.

LAO's Recommendation in January. In January, we found that the Department of Conservation’s CGS has qualified technical experts on staff who are capable of conducting a review of PG&E’s study, and we were advised by CGS that it may be able to conduct the review at a cost significantly less than requested in the budget request. Therefore, we recommended that the Legislature deny the budget proposal as requested, and direct that the administration to return with a revised lower-cost proposal that uses the services of CGS. The Legislature adopted our recommendation and directed the administration to return with a revised proposal.

April Finance Letter. The Governor has submitted an April Finance Letter with a revised proposal to increase the CPUC's reimbursement authority by $393,000 to enter into limited-term, interdepartmental agreements to create and fund a review panel made up of the CGS, the State Seismic Commission, the Coastal Commission, and the CEC to perform analysis of the required seismic studies of Diablo Canyon.

Updated LAO Recommendation in Light of April Finance Letter. The Governor's April Finance Letter proposes a more cost-effective approach than the original January budget proposal for the conduct of the required seismic studies. As such, we recommend the Legislature approve the Governor's April Finance Letter.