ALJ/JPO/sid DRAFT Agenda ID #2476

Ratesetting

9/18/2003 Item 28

Decision PROPOSED DECISION OF ALJ O'DONNELL (Mailed 7/15/2003)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Application of Pacific Gas and Electric Company in its 2002 Nuclear Decommissioning Cost Triennial Proceeding. (U 39 E)

Application 02-03-020 (Filed March 15, 2002)

Robert B. Mc Lennan, Attorney at Law, for Pacific
Gas and Electric Company, applicant.

Gregory Heiden, Attorney at Law, for the Office
of Ratepayer Advocates; Scott L. Fielder,
Attorney at Law, for the Surfrider Foundation;
and Bob Finkelstein, Attorney at Law; and
Bill Marcus for The Utility Reform Network;
interested parties.

TABLE OF CONTENTS

Title Page

O P I N I O N 2

I. Summary 2

II. Background 3

III. Overview 4

IV. Utility-Specific Issues 5

A. Diablo Canyon Decommissioning Cost Estimate 5

B. Humboldt Decommissioning Costs and O&M Expenses 6

C. Early and Partial Decommissioning of Humboldt 7

D. Equity Turnover Assumption 8

V. Common Issues 10

A. Rate of Return 10

B. Escalation Rate 14

C. LLRW Burial Costs 20

D. Contingency Factors 22

VI. Conclusion 26

VII. Rate Proposal 27

VIII. Procedural Matters 28

IX. Comments on Proposed Decision 28

X. Assignment of Proceeding 29

Findings of Fact 29

Conclusions of Law 34

ORDER 37

O P I N I O N

I. Summary

The purpose of this nuclear decommissioning cost triennial proceeding (NDCTP) is to set the annual revenue requirements for the decommissioning trusts for nuclear power plants owned by Pacific Gas and Electric Company (PG&E).

For 2003, PG&E requests an annual revenue requirement of $24.034 million for decommissioning Diablo Canyon Power Plant Units 1 and 2 (Diablo Canyon). PG&E also requests an annual revenue requirement of $17.511 million for decommissioning Humboldt Bay Power Plant Unit 3 (Humboldt). In addition, PG&E requests $8.254 million for Humboldt SAFESTOR O&M.¹ The resulting annual revenue requirement is $49.799 million.

By this decision, we find that the trust funds for Diablo Canyon are sufficient to pay for its eventual decommissioning. In addition, we set the annual revenue requirement for Humboldt at $18.450 million. The primary reasons for the differences between the requested and adopted numbers are different adopted rates of return for the trusts, cost escalation rates, contingency factors, and low level radioactive waste (LLRW) burial costs. We also grant PG&E's request for a revenue requirement of $8.254 million for Humboldt SAFESTOR O&M. The total adopted annual revenue requirement of $26.704 million is a $4.48 million decrease from the currently adopted revenue requirement of $31.2 million.

In addition to the above revenue requirement, we find that the $0.95 million expenditure for Humboldt decommissioning costs incurred above the $15.7 million authorized in Resolution E-3503 was reasonable, and authorize PG&E to recover the costs from the Humboldt decommissioning cost trusts. We also order the $3.5 million and $3.85 million Humboldt decommissioning projects authorized in Resolution E-3737 to be reviewed for reasonableness in the next NDCTP, after they have been completed.