Carbon-Free Power at No Charge. What Could Possibly Go Wrong? 

PG&E offers East Bay Community Energy a long-term supply of free electricity with a catch: it's nuclear.

click to enlarge The gift that keeps on giving: Diablo Canyon.

Photo by Marya from San Louis Obispo-Creative Commons

The gift that keeps on giving: Diablo Canyon.

Last fall, Pacific Gas and Electric Co. made an offer that sounded hard to refuse. It would give its main rivals — community choice electricity programs, including Alameda County's East Bay Community Energy — millions of dollars a year worth of carbon-free electricity at no charge. But there was a catch. Most of that free electricity would come from California's last remaining nuclear reactor, PG&E's aging, earthquake-vulnerable Diablo Canyon power plant in San Luis Obispo County.

Over the last ten years, PG&E has lost half its customers to these new "community choice" programs, local public agencies whose mission is to sell cleaner energy at lower prices than "investor-owned" corporate utilities.

The idea of using nuclear energy produced an outcry from the coalition of community organizations that helped create East Bay Community Energy. Nuclear energy "endangers public safety," said a letter from the East Bay Clean Power Alliance. And accepting nuclear power would be "a slap in the face" to the Bay Area's nuclear-free values. The organization said its members were shocked that at an October meeting of the EBCE board of directors, CEO Nick Chaset "encouraged board members to be open" to this proposal.

In an interview, Chaset said he has not yet made up his mind about accepting PG&E's offer. "There are pros and cons," he said. "I'm in favor of putting the facts out there and having the board make a decision," probably in the next month or two.

Chaset explained that accepting the offer of free nuclear-generated electricity could help the agency deal with a looming threat: The exit fees that community choice agencies must pay PG&E are due to rise sharply in 2020. He estimated that this will add 30 percent to East Bay Community Energy's costs. The free nuclear-generated electricity — $11 million worth a year — could help offset that new cost and keep down charges to customers.

The Diablo Canyon plant is already scheduled to close by 2025. Until then, Chaset said, it will keep producing the same amount of electricity whether it goes to PG&E customers or community choice customers. He said he doesn't believe that this schedule will be affected by whether or not community choice programs use Diablo Canyon's energy. And, he added, in the rivalry between PG&E and community choice programs over whose electricity is "cleaner," keeping nuclear power in its energy mix allows PG&E to claim a higher percentage of "carbon-free" electricity.

Yet critics argue that nuclear power is not clean energy, and that accepting it could undermine the effort to close Diablo Canyon ahead of schedule. If the California Public Utilities Commission is looking for a reason to reject early closure, "they could say 'look, we have a market,'" said Jessica Tovar of the Local Clean Energy Alliance.

Her organization says that rather than accepting nuclear energy, East Bay Community Energy should join forces with the Alliance for Nuclear Responsibility, which is pushing to close Diablo Canyon early. Why? "One word," said David Weisman, spokesperson for the group. "Fukushima."

The agreement between PG&E and the CPUC to close Diablo Canyon by 2025 came after studies revealed that the several earthquake faults under the reactor were more dangerous than previously reported. Operating it any longer "is like playing Russian roulette," said Barbara Stebbins of the Local Clean Energy Alliance.

The sooner the plant closes, Weisman said, the sooner PG&E will be able to clean up the pools of dangerous, radioactive nuclear waste adjacent to it. And as long as the plant is there, said Tovar, "it's a terrorism target." In addition, "an early shutdown could save ratepayers billions," according to the Alliance for Nuclear Responsibility petition, because "it's the most expensive form of energy."

East Bay Community Energy customers are already paying a premium for keeping Diablo Canyon open. That cost is part of the exit fee that community choice customers continue to pay to PG&E. The company won the right to charge an exit fee because it had signed long-term contracts to buy energy before many of its customers left to join community choice programs. Those contracts locked PG&E into buying energy at way over the current market rate, so community choice customers have to pay the difference. By the same logic, those customers have to pay the above-market cost of operating Diablo Canyon. The Local Clean Power Alliance estimates that Diablo Canyon cost East Bay Community Energy $83 million in 2019 and will cost $90 million in 2020. Closing the reactor would save far more than the $11 million East Bay Community Energy would save by accepting nuclear energy.

Chaset agreed that if Diablo Canyon closes early, East Bay Community Energy will pay lower exit fees. He said he is "not opposed to early closure," but added, "The question is what are you going to replace it with? We don't want to replace it with natural gas. A clean energy replacement plan would be complicated."

Weisman believes that it will not be necessary to replace Diablo Canyon energy. He said PG&E agreed to the 2025 shutdown date because it thought that was the year energy from Diablo Canyon would no longer be needed. Because by then, PG&E predicted, so many PG&E customers would have left for community choice programs and the cost of renewable energy would have dropped so low. Weisman says those conditions have already happened. PG&E has already lost more customers than it predicted it would lose by 2025, and the price of renewables has gone way down. He pointed out that sometimes PG&E disconnects renewable energy sources from the grid because there's too much electricity, while Diablo Canyon continues to run full blast because a nuclear reactor can't be turned down. That inflexibility makes nuclear energy inappropriate as a backup for renewables, Weisman said. The real solution is storage.

At a January meeting of the power provider's Community Advisory Committee, participants agreed not to support accepting nuclear energy into East Bay Community Energy's portfolio. Representatives from the Alameda County Labor Council said most local unions oppose nuclear energy. Anne Olivia Eldred, immediate past chair of the Advisory Committee, added another financial concern. She recalled that when the San Onofre nuclear plant malfunctioned, ratepayers were on the hook for the costs, including the higher cost of the replacement energy purchased on the more-expensive short-term market.

Participants in the meeting also noted that if community choice agencies accept the nuclear power, greenhouse gas emissions from California's electric grid could increase as a result. They pointed to an East Bay Community Energy staff report predicting the likely results if PG&E gives its nuclear energy to community choice programs: PG&E would probably choose to start using more natural gas. Increasing carbon emissions is counter to the basic purpose of community choice programs.

The meeting also highlighted the connection between the offer of free nuclear energy and the calculations about the exit fees community choice customers pay to PG&E. Community choice agencies are challenging the sharp increase in exit fees now scheduled for this year, but PG&E's offer of free electricity comes with a catch. Any program that accepts it would be barred from challenging one of the main assumptions behind the high fee.

Some participants at the meeting also objected to the fact that the staff of East Bay Community Energy, and five other Bay Area community choice programs, sent state utility regulators a letter supporting PG&E's proposal to offer the free energy to community choice programs. Eldred argued that it was not appropriate for the staff to take this controversial step without a prior public discussion. But Chaset countered that the letter did not endorse the acceptance of PG&E's free nuclear power, but merely support the ability for such power providers to consider PG&E's offer.

In addition to power from Diablo Canyon, PG&E's offer also included a smaller amount of energy generated by large hydroelectric projects. Both nuclear and large-hydro projects are carbon free but not classified as "renewable" energy because of their destructive environmental impacts. Most East Bay Community Energy board members are in favor of accepting the allocation of hydroelectric power, Chaset said.

The board is set to discuss whether to accept the offer of nuclear energy at its upcoming meetings. Board Chair and Oakland City Councilmember Dan Kalb, said in an interview, "As it stands, I would not favor accepting nuclear power into the East Bay Community Energy portfolio mix." And nuclear opponents are gearing up for a fight. The East Bay Clean Power Alliance wrote in a letter to the board, "We can assure you that all of our member community organizations will join us in actively opposing the inclusion of nuclear power in EBCE's portfolio." 

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