Pacific Gas & Electric?s Diablo Canyon nuclear plant is reliable, has reduced air pollution compared with fossil-fuel plants, and allows for a diverse power portfolio, which may justify investments in new steam generators to extend the plant?s life within certain parameters?according to a January 25 proposed decision by a California Public Utilities Commission administrative law judge. Judge Jeffrey O?Donnell recommended the utility be allowed to invest up to $706 million in new capital without being subject to after-the-fact commission review of the ratepayer investment. If, however, the replacement exceeds $706 million, the utility could be subject to a reasonableness review. The interim decision, which rejects several of the intervenors? proposals regarding cost controls, would cap investments at $815 million. During lengthy hearings, PG&E argued that without the new steam generators, the facility could not produce electricity much beyond 2010 because of potential leaks in steam generator tubes. The utility presented methodology that it claims proves the investment is the cheapest way to provide electricity. However, intervenors, such as The Utility Reform Network, maintained that PG&E used numbers that unfairly boosted its case when comparing them to forecasts the utility used in other cases. Intervenors questioned assumptions in PG&E?s forecasts, including higher projected costs for wind and fossil fuel in this case than PG&E assumes in other cases, according to TURN attorney Matt Freedman. When the Office of Ratepayer Advocates, however, ran the numbers for its testimony, it derived cost-effectiveness results similar to PG&E?s. The judge used that testimony to validate PG&E?s forecasts. The judge allowed PG&E to strike testimony from third-party generators that would have introduced actual bid cost comparisons for alternatives to nuclear power (<i>Circuit<\/i>, Dec. 3, 2004). O?Donnell said that striking testimony from the Western Power Trading Forum did not, however, preclude presenting alternative proposals. Also not allowed in the discussion of Diablo?s extended efficacy was the plant?s potential for earthquake problems if its life span were extended. The proposed decision states that the possibility of future revisions to Diablo?s seismic design criteria ?supports the conclusion that some increase in future capital additions and operations and maintenance above the amount forecast is appropriate.? O?Donnell also rejected another intervenor proposal. The Aglet Consumer Alliance requested?with TURN?s support?that PG&E guarantee savings from the investment. Because the proposed decision does not totally rule out a reasonableness review, the judge rejected Aglet?s plan. PG&E?s cost forecasts assume that if the plant were to be shut down because of an earthquake, a breach of security (terrorism), or an accident, the utility would have its remaining investment ?fully recovered from ratepayers.? The judge, however, took issue with this proposal. He would allow that the utility might have the plant amortized over four years in the rate base at a ?reduced or even no return? even if it is not used and useful. Traditionally, a power plant has to be in service?or used and useful?in order for it to remain in the rate base. PG&E did not return a request for comment. Another intervenor issue the judge denied was the allegation that PG&E should have pursued litigation and refunds against steam generator contractor Westinghouse. Other nuclear owners have sued the company for alleged shoddy design. ?PG&E is one of the few utilities that took no action against Westinghouse,? said TURN?s Freedman. TURN argued that the utility should face a disallowance for not pursuing the steam generator contractor. Instead, PG&E contracted again with Westinghouse ?in excess of $100 million? last year to provide new steam generators before the CPUC?s hearings had concluded (<i>Circuit<\/i>, Oct. 15, 2004). PG&E was rebuffed in its attempt to get O?Donnell to approve the contract prior to a CPUC vote on the entire investment. The interim decision does not make a final approval of PG&E?s investments in new steam generators because California Environmental Quality Act issues are still in play and could modify any investments. Similar hearings on Southern California Edison?s investment in new steam generators for its San Onofre Nuclear Generating Station units are set to begin next week at the commission. Although most of the staff involved with the Diablo case are currently preparing for the San Onofre hearings, the judge refused to extend time limits for responses to the proposed decision.