X. Assignment of Proceeding
Geoffrey F. Brown is the Assigned Commissioner and Jeffrey P. O'Donnell is the assigned Administrative Law Judge in this proceeding.
1. Early decommissioning of Humboldt is less costly than decommissioning starting in 2015.
2. The decommissioning cost studies upon which PG&E's estimates for Diablo Canyon and Humboldt are based are unopposed except for contingency factors, escalation rates, rates of return, and LLRW burial cost estimates.
3. PG&E's request for authority to recover $8.254 Million in Humboldt SAFESTOR O&M is unopposed.
4. PG&E's request to adjust the SAFESTOR O&M administrative, general, tax, and allocated common plant amounts in the calculation of decommissioning cost revenue requirements in its 2003 general rate case is unopposed.
5. PG&E's request for attrition for the SAFESTOR O&M for 2004 and 2005 is unopposed.
6. PG&E has already commenced early decommissioning activities at Humboldt.
7. In Resolution E-3503, the Commission authorized PG&E to spend $15.7 million on three decommissioning projects, and found it reasonable to use the decommissioning trust funds to finance them.
8. In Resolution E-3737, the Commission found it reasonable to use the decommissioning trust funds to finance three proposed projects. The $3.5 million and $3.85 million projects were approved subject to review of the requested expenditures in this proceeding. The request for approval of the $0.95 million project was denied until reviewed in this proceeding.
9. PG&E's request to use the Humboldt decommissioning trusts to pay for the $0.95 million project is unopposed.
10. The $3.5 million and $3.85 million projects have not been completed.
11. For 1999 through 2002, PG&E's annual equity turnover rate ranged from 18% to 27% for qualified trusts, with an average of 24%. For 2000 through 2002, its annual equity turnover rate ranged from 18% to 49% for non-qualified trusts with an average of 29%.
12. PG&E has given us no reason to believe that future equity turnover rates will be substantially different from recorded turnover rates.
13. In D.00-02-046, the Commission adopted a forecast of an 11% pre-tax return on equities, and a 7% pre-tax return on the fixed income portion of PG&E's trusts.
14. No participant has indicated specifically how differences in decommissioning trust portfolios, and investment committee risk tolerances are incorporated into its rate of return estimates.
15. The three utilities' trusts will have access to the same equities markets, with the same investment opportunities.
16. While there is merit in using long-term historical data for estimating rates of return, selection of which data to use can give quite different results.
17. The DRI forecasts, which SDG&E and SCE use in different ways, yield much lower returns than the historical data used by PG&E and ORA.
18. No participant has demonstrated that its estimate of pre-tax returns on equities is better than the other participant's estimates.
19. Since the midpoint of the pre-tax returns on equities recommended by the participants is lower than the 11% pre-tax return on equities adopted in D.00-02-046, a reduction in the pre-tax return on equities is appropriate.
20. A 10.5% pre-tax return on equities is slightly above the midpoint of the range of values proposed by the participants.
21. No participant has demonstrated that its estimate of pre-tax returns on fixed assets is better than the other participant's estimates.
22. Since the midpoint of the pre-tax returns on fixed assets recommended by the participants is lower than the 7% pre-tax return on fixed assets adopted in D.00-02-046, a reduction in the pre-tax return on fixed assets is appropriate.
23. A 6.0% pre-tax return on fixed assets is slightly above the midpoint of the range of values proposed by the participants.
24. The Commission adopted a 7.5% LLRW burial cost escalation rate for PG&E in D.00-02-046.
25. The NRC data shows rapidly increasing LLRW burial costs followed by large, discrete jumps.
26. The utilities did not include a separate contingency factor in their calculation of escalation rates.
27. Since PG&E's unweighted calculation of escalation rates gives a 20% weighting to each of the five escalation categories, while the equipment and materials category accounts for 29%, and the "other" category accounts for 6% of actual expenditures, PG&E's use of a simple unweighted average is inaccurate.
28. The participants agree that a DRI forecast should be used in forecasting escalation rates, except for LLRW burial cost escalation.
29. ORA's DRI forecasts are the most recent in the record.
30. When using DRI forecasts to estimate escalation rates, use of the value for the last forecasted year for subsequent unforecasted years gives additional weight to the last forecasted year.
31. There is no reason that the DRI forecast for the last forecasted year is any better than the forecast for other years.
32. The Commission adopts contingency factors for cost estimates when the work to be done, and the requirements that must be met to do the work, may change substantially over time.
33. The escalation rate is an estimate of the rate of change in the cost of specified work.
34. The Commission routinely adopts forecasts of cost increases, in general rate cases for example, without applying contingency factors.
35. Since the risk of substantial changes in the work to be done and the requirements that must be met to do the work is covered by the contingency factor applied to the decommissioning cost estimate, there is no reason to apply a separate contingency factor to the calculation of the escalation rate.
36. The NRC LLRW burial cost data shows significant jumps, and has no data for some years.
37. ORA has not demonstrated that its recorded LLRW burial cost increases from 1996 to the present provide a better basis for estimation than the NRC data used by the utilities.
38. It is uncertain where the LLRW will be buried, and at what cost.
39. LLRW burial costs are no less certain now than they were when the Commission adopted a 7.5% LLRW burial cost escalation rate for PG&E in D.00-02-046.
40. No participant has demonstrated that its LLRW burial cost estimate is more accurate than the other participants' estimates.
41. The midpoint of the range of LLRW burial cost escalation rates proposed by the participants is 7.5%.
42. The facility at Barnwell, South Carolina, upon which PG&E's LLRW burial cost estimate is based, is going to stop accepting wastes from non-Atlantic Compact generators such as PG&E, SCE, and SDG&E.
43. The midpoint of the range of LLRW disposal costs proposed by the parties is $240 per cubic foot.
44. The utilities have done a more comprehensive analysis of decommissioning costs, especially for SONGS 2&3, than PG&E.
45. The decommissioning cost study for Palo Verde was prepared by the same consultant that prepared PG&E's decommissioning cost studies.
46. PG&E's contingency factors for Diablo Canyon and Humboldt accommodate engineering, financial, regulatory, and industry uncertainties in the initial cost estimate, while the TLG contingency factor addresses only engineering uncertainties.
47. SCE has utilized its decommissioning experience and knowledge to reduce the contingency factor to 21% for SONGS 2&3.
48. PG&E has access to much of the same industry information as SCE.
49. PG&E availed itself of industry information and experience to produce its decommissioning cost estimates.
50. The fact that SONGS 2&3 are estimated to begin decommissioning in 2022, and Diablo Canyon is estimated to begin decommissioning in 2021-2025, suggests the use of a contingency factor for Diablo Canyon of less than 40%.
51. PG&E's Diablo Canyon decommissioning cost estimate has not been refined to the level of the utilities' estimate for SONGS 2&3.
52. PG&E's 30% contingency factor for Humboldt is based on early decommissioning.
53. With early decommissioning of Humboldt scheduled to start in 2006, there should be substantially less uncertainty than for Diablo Canyon or Palo Verde, since they will all begin decommissioning much later.
54. Since SONGS 2&3 will begin decommissioning much later than Humboldt, a contingency factor closer to 21% is appropriate.
55. Since decommissioning planning for Humboldt has not been done to the same level of detail as for SONGS 2&3, use of a 21% contingency factor for Humboldt would be inappropriate.
56. PG&E's proposal to implement the revenue requirement adopted herein on an equal cents per kilowatt-hour basis is unopposed.
1. PG&E's recommended early decommissioning of Humboldt should be adopted.
2. PG&E's request for authority to recover $8.254 Million in Humboldt O&M should be granted.
3. PG&E's request for authority to adjust the administrative, general, tax, and allocated common plant amounts in the calculation of Humboldt O&M expenses in its 2003 general rate case should be granted.
4. PG&E's request for attrition for SAFESTOR O&M for 2004 and 2005 should be granted.
5. The $0.95 million expenditure for Humboldt decommissioning costs incurred above the $15.7 million authorized in Resolution E-5303 was reasonable, and PG&E should be allowed to recover the costs from the trusts.
6. The $3.5 million and $3.85 million projects authorized in Resolution E-3737 should be reviewed for reasonableness in the next NDCTP, after they have been completed.
7. The Commission should adopt a 24% turnover rate for equities in the qualified trusts, and 29% for equities in the non-qualified trusts. For any year in which a higher amount of equities will need to be sold to pay for decommissioning costs, the higher amount should be used.
8. The Commission should adopt a uniform set of rate of return projections for all PG&E, SCE, and SDG&E.
9. D.99-06-007 approved a settlement and, therefore, is not a precedent.
10. The Commission should adopt a 10.5% pre-tax return on equities.
11. The Commission should adopt a 6.0% pre-tax return on fixed assets.
12. Since PG&E's actual expenditures do not support use of a simple average in determining escalation rates, and the utilities use a weighted average, the Commission should require the use of a weighted average.
13. Although forecasts of the future are speculative by nature, it makes sense to use the most recent available forecasts in estimating escalation rates.
14. The Commission should adopt the DRI forecasts used by ORA, which are the most recent DRI forecasts in the record, for use in determining escalation rates.
15. When using DRI forecasts for estimating escalation rates, the average rate for the forecast period should be used for the subsequent unforecasted years.
16. The Commission should not adopt a separate contingency factor for escalation rates where one is already applied to the decommissioning cost estimate.
17. NRC LLRW burial cost data does not provide a good basis for estimating LLRW burial cost escalation.
18. The Commission should adopt a 7.5% escalation rate for LLRW burial costs.
19. Future LLRW burial costs are uncertain at best.
20. PG&E's estimate of LLRW burial costs is no better than the estimates prepared by the utilities.
21. Actual LLRW burial costs will lie within the range of estimates proposed by the participants.
22. The Commission should adopt a LLRW burial cost estimate of $200 per cubic foot.
23. The Commission should adopt a 35% contingency factor for Diablo Canyon.
24. The Commission should adopt a 25% contingency factor for Humboldt.
25. Since PG&E's decommissioning trusts for Diablo Canyon are sufficient to cover the estimated decommissioning costs, no revenue requirement should be authorized for Diablo Canyon decommissioning.
26. The Commission should authorize annual revenue requirements of $18.450 million for Humboldt decommissioning, and $8.254 million for Humboldt SAFSTOR O&M.
27. This decision should be effective immediately.
28. D.00-06-034 requires that decommissioning costs be allocated on an equal cents per kilowatt-hour basis.
29. The revenue requirement adopted herein should be implemented on an equal cents per kilowatt-hour basis.
30. Implementation of the revenue requirement changes adopted herein, and in Resolution E-3823, should be addressed in I.02-04-026.
IT IS ORDERED that:
1. Annual revenue requirements of $18.450 million for decommissioning Humboldt Bay Power Plant Unit 3 (Humboldt), and $8.254 million for Humboldt SAFSTOR operations and maintenance expenses are adopted for 2003.
2. No revenue requirement is authorized for decommissioning Diablo Canyon Nuclear Power Plant Units 1 and 2.
3. Pacific Gas and Electric Company (PG&E) shall implement the revenue requirements adopted herein on an equal cents per kilowatt-hour basis.
4. Implementation of the revenue requirement changes adopted herein, and in Resolution E-3823, shall be addressed in Investigation 02-04-026.
5. PG&E's request for attrition for its SAFESTOR O&M expenses in the amounts of $218,000 for 2004, and $230,000 for 2005 is granted.
6. PG&E's request for authority to adjust the administrative, general, tax, and allocated common plant amounts in the calculation of Humboldt SAFESTOR operation and maintenance expenses in its 2003 general rate case is granted. The amount of any such adjustment shall be determined therein.
7. The $0.95 million expenditure for Humboldt decommissioning incurred above the $15.7 million authorized in Resolution E-5303 is reasonable, and PG&E is authorized to recover the costs from the Humboldt decommissioning trusts.
8. The $3.5 million and $3.85 million Humboldt decommissioning projects authorized in Resolution E-3737 shall be reviewed for reasonableness in the next nuclear decommissioning cost triennial proceeding, after they have been completed.
9. This proceeding is closed.
This order is effective today.
Dated , at San Francisco, California.
Attachment A to O'Donnell Agenda Dec.
