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.
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.
According to the commission, the approved Diablo Canyon plan will allow the utility to price power from the plant at market rates by the year 2003 and to completely recover associated market restructuring transition costs by 2005. It rejected a proposal by the state's Office of Ratepayer Advocate to lower rates for small customers by an additional 10 percent. The ORA had claimed that the additional rate cut could be accomplished by reducing proposed sunk cost recovery and associated incremental cost recovery prices to reflect "reduced risks and reasonable expectations." According to the commission, the ORA proposal would have impeded utility recovery of its transition costs and at the same time shifted costs between customer classes, a result prohibited under AB 1890. Re Pacific Gas & Elec. Co., Application 96-03-054, Decision 97-05-088, May 21, 1997 (Cal.P.U.C.).