California Identifies Diablo Canyon Sunk Costs

Fortnightly Magazine - September 1 1997
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The California Public Utilities Commission has valued sunk costs for the Diablo Canyon nuclear generating plant at $3.287 billion. The ruling forms the basis for future ratemaking treatment for the plant assets by its owner, Pacific Gas and Electric Co., according to industry restructuring under way in the state.

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The approved rate plan includes an overall rate freeze and a bond-financed 10-percent rate reduction for residential and small commercial customers. Both are called for under the state's new electric industry restructuring law (Assembly Bill 1890). In arriving at the sunk-cost figure, the commission disallowed approximately $65 million due to construction errors. It also adopted a plant capacity factor of 83.6 percent for the five-year transition-recovery period.

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