PG&E 2012 Annual Report Download - page 51

In addition, as an operator of the two operating nuclear reactor units at Diablo Canyon, the Utility may be
required under federal law to pay up to $235 million of liabilities arising out of each nuclear incident occurring not
only at the Utility’s Diablo Canyon facility but at any other nuclear power plant in the United States. (See Note 15
of the Notes to the Consolidated Financial Statements.) The Utility’s ability to continue to operate its nuclear
generation facilities also is subject to the availability of adequate nuclear fuel supplies on terms that the CPUC will
find reasonable.
The NRC oversees the licensing, construction, and decommissioning of nuclear facilities and has broad authority
to impose requirements relating to the maintenance and operation of nuclear facilities; the storage, handling and
disposal of spent fuel; and the safety, radiological, environmental, and security aspects of nuclear facilities. The NRC
has adopted regulations that are intended to protect nuclear facilities, nuclear facility employees, and the public from
potential terrorist and other threats to the safety and security of nuclear operations, including threats posed by
radiological sabotage or cyber-attack. The Utility incurs substantial costs to comply with these regulations. In
addition, in March 2012, the NRC issued several orders to the owners of all U.S. operating nuclear reactors to
implement the highest-priority recommendations issued by the NRC’s task force to incorporate the lessons learned
from the March 2011 earthquake and tsunami that caused significant damage to the Fukushima-Dai-ichi nuclear
facilities in Japan. The NRC may issue further orders to implement the recommendations, including facility-specific
orders, which could require the Utility to incur additional costs.
The Utility has filed an application at the NRC to renew the operating licenses for the two operating units at
Diablo Canyon which expire in 2024 and 2025. In May 2011, after the Fukushima-Dai-ichi event, the NRC granted
the Utility’s request to delay processing the Utility’s application until certain advanced seismic studies that the CPUC
ordered the Utility to conduct were completed. In November 2012, the California Coastal Commission denied the
Utility’s request for permits to conduct some of these advanced studies. The Utility is assessing whether it has
sufficient seismic data without conducting the high energy off-shore studies or if other studies are needed. It is
uncertain when the Utility would request the NRC to resume the relicensing proceeding. In order to receive renewed
operating licenses, the Utility also must undergo a sufficiency review by the California Coastal Commission. The
disposition of the Utility’s relicensing application also will be affected by the terms and timing of the NRC’s ‘‘waste
confidence’’ decision regarding the environmental impacts of the storage of spent nuclear fuel. The NRC’s original
‘‘waste confidence decision’’ in which the NRC found that spent nuclear fuel can be safely managed until a
permanent off-site repository is established, was successfully challenged on the basis that the NRC’s environmental
review was deficient. In August 2012, the NRC ruled that it will not issue final decisions in licensing or re-licensing
proceedings, including the Utility’s re-licensing application, until it had reconsidered the waste confidence issues. The
NRC stated that it would consider all available options for resolving the waste confidence issue, which could include
generic or site-specific NRC actions, or some combination of both. The NRC has instructed its staff to develop and
issue a new waste confidence decision and temporary storage rule by September 2014.
The CPUC has authority to determine the rates the Utility can collect to recover its nuclear fuel, operating,
maintenance, compliance, and decommissioning costs. The Utility also could incur significant expense to comply with
regulations or orders the NRC may issue in the future to impose new safety requirements, to obtain license renewal,
and to comply with federal and state policies and regulations applicable to the use of cooling water intake systems at
generation facilities, such as Diablo Canyon. (See ‘‘Environmental Matters’’ above.) The Utility expects that it would
seek rate recovery of these additional costs. The outcome of these rate proceedings at the CPUC can be influenced
by public and political opposition to nuclear power. If the Utility were unable to recover costs related to its nuclear
facilities, PG&E Corporation’s and the Utility’s financial condition, results of operations, and cash flows could be
materially affected. The Utility may determine that it cannot comply with the new regulations or orders in a feasible
and economic manner and voluntarily cease operations at Diablo Canyon. Alternatively, the NRC may order the
Utility to cease its nuclear operations until it can comply with new regulations or orders. Further, the Utility could
fail to obtain renewed operating licenses for Diablo Canyon requiring nuclear operations to cease when the current
licenses expire in 2024 and 2025.
The Utility’s operations are subject to extensive environmental laws and changes in or liabilities under these laws could
adversely affect PG&E Corporation’s and the Utility’s financial conditions, results of operations, and cash flows.
The Utility’s operations are subject to extensive federal, state, and local environmental laws, regulations, orders,
relating to air quality, water quality and usage, remediation of hazardous wastes, and the protection and conservation
of natural resources and wildlife. The Utility can incur significant capital, operating, and other costs associated with
compliance with these environmental statutes, rules, and regulations. These costs can be difficult to forecast because
the extent of contamination may be unknown. For example, the Utility’s costs to perform hydrostatic pressure testing
47