IV. Need for the SGRP

No party disputes PG&E's claim that the steam generators must be replaced if Diablo is to stay in operation through the end of its license lives. However, the parties differ on when the units will have to shut down if the SGRP is not performed.

PG&E represents that the least-cost and least-risk timing of the replacement is 2008 for Unit 2, and 2009 for Unit 3. PG&E states that the timing is important because delay would: (1) increase the risk of a failure resulting in a forced outage before replacement; (2) result in increased project cost escalation, and costs for additional inspection, repair and maintenance of the existing steam generators; and (3) cause coordination problems with the steam generator replacement projects for the San Onofre Nuclear Generating Station (SONGS) scheduled by Southern California Edison Company (SCE) for 2009. PG&E represents that a one fuel cycle delay would cost an additional $33 million and a two cycle delay would cost an additional $67 million.

The Commission's Office of Ratepayer Advocates (ORA) recommends that the SGRP be delayed until 2009-2010. It says that the delay would cost only $33 million, and would allow PG&E and the Commission to determine whether steam generator degradation is occurring at a faster or slower rate than predicted. ORA also represents that if degradation occurs at a slower rate, "PG&E will be able to get a little extra use out of the existing steam generators," and determine the effectiveness of sleeving degraded tubes to allow them to be returned to service.

The SGRP is needed if Diablo is to continue operating throughout the remainder if its license lives. If the SGRP is to go forward, ORA's recommended delay would result in more monies being spent on the original steam generators, without a corresponding decrease in the cost of the SGRP. In addition, there is an increased risk of a forced outage as the steam generators degrade. As a result, if the SGRP is approved, it should be performed according to PG&E's proposed schedule.

The Utility Reform Network (TURN) recommends that if the SGRP is approved for Diablo, and also approved for SONGS in Application (A.) 04-02-026, the Commission should have a consolidated phase of both proceedings to determine whether the risks of capacity shortages, when compared to the costs of project delays, warrant a change in the steam generator replacement schedule for one or both facilities. Since we have reached no decision in A.04-02-026, it is premature to consider TURN's recommendation at this time, and we will not do so.

TURN represents that the current statutory prohibition on customers leaving bundled service will expire before 2014, and that the lifting of this prohibition could lead to the reduction of bundled loads served by PG&E. In other words, some customers could purchase power from the market rather than PG&E. TURN states that this could lead to a reduction in PG&E's retail load, which could result in a reduced need for PG&E to procure replacement capacity in the event that Diablo shuts down. TURN says that if the SGRP is performed, Diablo power would then have to be sold on the market. TURN recommends that PG&E should be ordered to change its model inputs accordingly.

It is possible that the end of the current statutory prohibition on customers leaving bundled service could lead to the reduction of bundled loads served by PG&E. However, the record does not indicate the probability of this happening, when it would occur, or the amount of the reduction. In addition, the load would still have to be served. As a result, it does not follow that the demand for electricity would be reduced, or that Diablo would not be needed. Therefore, we see no reason to adjust our cost-effectiveness analysis for this possibility. Even if we were inclined to do so, we have no basis for determining what adjustment to make.