On Halloween, PG&E took the next step in continuing the operation of Diablo Canyon by submitting its renewal application to the federal Nuclear Regulatory Committee (NRC). Diablo Canyon’s two units are scheduled to retire in 2024 and 2025.

“This request to renew our licenses is another step to help California reliably achieve its bold decarbonization goals,” said PG&E Chief Nuclear Officer Paula Geffen. 

PG&E’s application does not come as a surprise. In September, Governor Newsom signed a bill that gave the utility a $1.4 billion loan to help extend the life plant. The law calls for the Department of Water Resources to issue up to a $1.4 billion loan to PG&E for the extension. The bill also asks the California Energy Commission to present a cost comparison and operations assessment of the Diablo Canyon powerplant by late 2023. It also invalidates a 2018 CPUC decision that initially allowed the plant to retire by 2025. The bill calls on the CPUC to extend the plant for five years and to spread the costs associated with the plant to all ESPs, CCAs and IOUs. It also extends the once-through cooling exemption for Diablo Canyon until the end of 2030.

The application also comes just one month after PG&E announced plans to create a second company called Pacific Generation which holds the hydropower and other non-nuclear generating assets. A portion of Pacific Generation would be available to investors with the revenue used for capital investment. This also put to rest rumors that Diablo Canyon would be put up for sale.

While the Governor supports the extension, the 2,200-megawatt Diablo Canyon plant is still far from approval. In its filing, PG&E asked NRC to continue where it left off in the application process in 2018. That is when PG&E withdrew the application after reaching agreements with environmental groups to close the plant in 2025 and replace it with solar and other renewable energy. PG & E is hoping to continue the application process with the required updates so that the review can be completed within the next two years.

However, that timetable could close one, if not both, units before the approval processes are complete. Also, the previous application asked for an extension to 2045. That is much longer than Governor Newsom’s request for the facility to operate until 2030, potentially extending to 2035. 

To address the issue of the review process exceeding the existing MRC permits of 2024 and 2025, PG&E requested the NRC allow Diablo Canyon to continue operations while the application is being reviewed. 

Aside from NRC approval, other agencies will have to review the extension of Diablo Canyon, including the federal Department of Energy and FERC as well as state entities such as CEC, CPUC, California Coastal Commission, State Lands Commission, and California Department of Water Resources.

Facing four years of drought, record heat waves, and major wildfires, Governor Gavin Newsom this week (10/6) signed an agreement with the leaders of Oregon, Washington, and British Columbia to accelerate and expand efforts to reduce greenhouse gases and address the impacts of climate change.

The Statement of Cooperation unveiled at a news conference in San Francisco at the Presidio, was the latest effort by Newsom and other Democratic leaders to raise the profile of climate change and to take steps to continue to increase renewable energy, boost electric vehicles and widen efforts to thin fire-prone forests.

Newsom signed the agreement with Oregon Governor Kate Brown, Washington Governor Jay Inslee and British Columbia Premier John Horgan.

Among the goals set out in Thursday’s agreement:

• Coordinate the installation of more electric vehicle charging stations on the West Coast
• Expand zero-emission rules to trucks
• Invest more money in ports to allow large ships to plug into electric power rather than running engines off high-polluting bunker fuel
• Accelerate forest treatments, such as thinning and prescribed fire, to reduce wildfire risk
• Help public and private institutions electrify their vehicle fleets
• Focus more attention on low-income communities with help on renewable energy projects, energy-efficient buildings, cooling centers during heat waves and other efforts.

The partnership was originally set up in 2008 and endorsed at the time by former Governor Arnold Schwarzenegger. Then, it also included Alaska. Updates were signed in 2013 and 2016 by former Governor Jerry Brown.

All three of the governors who signed the agreement this week are Democrats.

NOTE: The general statement of principles is not a binding contract.

Governor Gavin Newsom said late this week (10/7) that he would call a special session of the Legislature to consider a windfall profit tax on oil companies in response to the “outrageous and unconscionable” price of gas in California.

Newsom told reporters the session would start December 5, far enough away for his Administration and Legislators to prepare for what would likely be a tough fight to impose a new tax even with a Democratic super-majority in the Legislature.  It would also take place after the November election, sparing candidates from having to take a difficult vote in the heat of campaign season.

Gas prices have climbed sharply in the last few weeks in California while staying steady or declining elsewhere, resulting in costs per gallon that average about $2.50 higher than in the rest of the country.

Newsom: “Nothing justifies these outrageous and unconscionable prices.”

A new tax would require a two-thirds vote from the Legislature.  Republicans have already come out in opposition, calling instead for the state to cut the gas tax — an idea Newsom quickly rejected because there’s no guarantee the savings would be passed on to consumers.

Newsom: “This is just price gouging.  They can’t get away with it, they’re fleecing you, they’re taking advantage of you, every single one every single day. Hundreds of millions of dollars a week they’re putting in their pockets.”

In addition to Newsom’s comments, the CEC has asked refineries to explain the spike, which the oil industry has blamed on maintenance at refineries.  Members of Congress from California have requested the Federal Trade Commission launch an investigation into possible market manipulation.

Newsom Picks a Fight with Oil

In calling for the tax while assailing the “greed” of oil companies, Newsom repeatedly excoriated the fossil fuel industry as he pushed through a climate change package and an oil industry group bought ads in Florida attacking Newsom’s energy record.  Newsom then touted those wins before national audiences.

Newsom will immediately test a huge new class of Legislative Democrats, as numerous incumbents are departing this year, and their replacements will be asked soon after taking office to vote on a tax increase.

It will also coincide with an Assembly leadership battle that is fracturing Democrats.  Returning Democratic Assembly members will need to choose whether to keep Speaker Anthony Rendon atop the caucus or replace him with Assemblymember Robert Rivas, the latest episode in a standoff that has opened deep rifts.

CEC Sounds Off on High Gasoline Prices

In addition to Newsom, CEC Chair David Hochschild released the following statement after sending a letter to oil executives last Friday asking for answers on the sudden, unprecedented spike in gas prices over the past month. This price spike is occurring despite decreasing crude oil prices, minimal unplanned outages for maintenance and no new state taxes or fees on gas at the pump. 

Hochschild: “As I expressed in my letter to the oil industry last week, the recent sudden increases in prices at the pump are unacceptable and place an undue high burden on California families and businesses.  Over the course of 10 days, oil companies increased gas prices by a record 86 cents per gallon. At the end of August, crude oil prices were roughly $100 per barrel, and the average gas price in California was $5.06. Now, even though the price of oil has decreased to $90 per barrel, today the average gas price at the pump has surged to $6.43.

The oil industry’s lobbying group argued that gas prices increased because of drilling permitting issues, which is misleading.  The reality is 40% of the oil industry’s approved permits in California are still valid but have not yet been used, and the price increase is occurring at the refining stage of gas production, not the oil extraction stage. And it does not explain the sudden gap between national and California prices.

All options are on the table to ensure Californians aren’t paying higher gas costs at the whims of the oil industry. Additionally, the CEC will use every tool at its disposal to get answers, and refusal to respond will factor into any fixes necessary.”  

CEC Letter to Refiners and Responses from Refiners

Political Reaction to the Call for the Special Session

Senate President pro Tem Toni Atkins and Assembly Speaker Anthony Rendon in a joint statement: “As stated last week, a solution that takes excessive profits out of the hands of oil corporations and puts money back into the hands of consumers deserves strong consideration by the Legislature. We look forward to examining the governor’s detailed proposal when we receive it.”

U.S. Rep. Norma Torres on Twitter: “Earlier this week, I wrote to the governor asking him to take this step — and I appreciate his quick action on this issue! I (look) forward to continuing to work together to address gas prices in our state.”

Assembly Republican Leader James Gallagher and Assemblyman Vince Fong, who is vice-chairs the Assembly Budget Committee, wrote to Newsom urging him not to call a special session for the purpose of raising taxes: “Californians are hit hard by soaring gas prices. The only reason to call a special legislative session would be to suspend the gas tax, reduce the fees and regulations that make California gas so much more expensive, and allow permits to increase production to lower gas prices.”

In a Tweet, Fong also added that Newsom is ignoring the real-world consequences of his energy policies, “and the hypocrisy is deafening.”

Republican National Committee statement: “the epitome of what’s wrong with California Democrats… Newsom and his supermajority are trying to distract voters from the fact that their policies made gas prices so high, but creating a new tax that will inevitably be handed down to taxpayers in the midst historic inflation is a failing strategy.”

As we stated in our coverage of the gasoline prices last week (see last week’s report) – it is worth repeating – there’s a month left until the election and no sign of gas price increases slowing down, October will be an interesting month for the oil and gas industry.

In a proposal quietly released by the California Public Utilities Commission (CPUC) this week, the Commission said that natural gas supplies in SoCal Gas’s Aliso Canyon storage field are necessary to meet summer and winter peak demand and to keep natural gas prices reasonable.  The proposal defers an assessment of what fossil-free resources could allow the closure of the controversial fossil fuel underground storage site in Los Angeles County. 

From the Proposal: “Aliso Canyon is currently needed to support just and reasonable gas and electricity rates, natural gas system reliability, and energy security.”

To close the storage field in 2027 and keep power flowing would necessitate annual reductions “of 214 million metric cubic feet per day in forecast peak gas demand, or an annual increase of 1,084 megawatts of non-gas-fired electric generation capacity, or some combination of both.”

Given the past few summers, and the fact that natural gas capacity is keeping the lights on in California, the conclusions should not come as a surprise.  Moreover, the CPUC’s IRP states that natural gas capacity (generation) will be needed through 2045.  Not only the currently available capacity of assets but an additional 900 MWs of new capacity will be needed.  

The wrinkle here is that former Governor Jerry Brown called for the field’s early closure and then again in 2019, Governor Gavin Newsom directed the field to be closed in advance of 2027.

Since the massive leak from the storage field that started in late 2015 and spewed more than 100,000 tons of methane, forcing evacuations from the nearby Porter Ranch, politicians and policymakers have called for the largest storage facility in the west to be closed because of safety concerns.

In 2017, the CPUC launched an investigation into the feasibility of phasing out the use of gas from Aliso Canyon. Increased well monitoring and testing were subsequently required.

In early November of last year, the CPUC voted unanimously to allow SoCalGas to increase the amount of gas storage at Aliso Canyon from 34 billion cubic feet (Bcf) to a little over 41 Bcf because of concerns about meeting winter demand.  At that time, the Commission expected the proceeding’s subsequent research on when to close Aliso—2027 or 2035—and how to fill in reliability gaps, to be completed within a year.

The latest CPUC proposal points to the challenges wrought by limited pathways for importing gas into the state “and existing aging gas pipelines that cannot deliver at their original planned capacities and would need substantial upgrades to do so,” according to the proposal.

An Economic Analysis Report by commission staff estimated that customers in the Southern area of the CAISO market paid about $600 million “in excess electricity costs in 2018 due to pipeline outages and Aliso Canyon restrictions.”