BILL ANALYSIS                                                                                                                                                                                                    



                                                                  AB 42
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          Date of Hearing:  April 13, 2009

                       ASSEMBLY COMMITTEE ON NATURAL RESOURCES
                                Nancy Skinner, Chair
                   AB 42 (Blakeslee) - As Amended:  March 31, 2009
           
          SUBJECT  :  Diablo Canyon Nuclear Power Plant and seismic safety.

           SUMMARY  :  Requires Pacific Gas and Electric Company (PG&E) to  
          seek funding for seismic fault surveys and retrofits at the  
          Diablo Canyon Nuclear Power Plant (Diablo Canyon) consistent  
          with the recommendations of the California Energy Commission  
          (CEC) in order to maintain grid reliability and reduce cost  
          impacts to ratepayers resulting from a seismic event.

           EXISTING LAW  :

          1)Requires the CEC to adopt an integrated energy policy report  
            (IEPR) every two years that includes an overview of major  
            energy trends and issues, including: supply, demand, pricing,  
            reliability, efficiency, impacts on public health and safety,  
            the economy, resources, and the environment.

          2)Required the CEC, by November 1, 2008, to include in the IEPR  
            and any updates an electricity supply forecast that includes: 

             a)   A compilation and assessment of existing scientific  
               studies to determine the potential vulnerability to a major  
               disruption due to aging or a major seismic event of large  
               baseload generation facilities 1,700 megawatts or greater  
               and; 
             b)   An analysis of the impact of a major disruption on  
               system reliability, public safety, and the economy.

           THIS BILL  :

          1)Requires PG&E to seek funding for seismic fault studies and  
            retrofits, deemed urgent by the CEC or the Seismic Safety  
            Commission (SSC), in the vicinity of the Diablo Canyon  
            consistent with the recommendations of the CEC in order to  
            maintain grid reliability and reduce costs to ratepayers due  
            to a seismic event.

          2)Requires the CEC to conduct a peer review of the above studies  
            and authorizes it to enter into agreement with qualified  








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            academic and industry scientists to conduct the peer review.

          3)Requires the CEC to include the findings and recommendations  
            of the peer review in the integrated energy policy report.

          4)Requires the Public Utilities Commission (PUC) to allow PG&E  
            to fully recover the costs of the seismic fault studies and  
            seismic retrofits from all of its electrical customers.

           FISCAL EFFECT  :  Unknown

           COMMENTS  :  On November 21, 2008, PG&E announced that they had  
          discovered a new earthquake fault within a mile offshore of  
          Diablo Canyon.  According to the author's office, the nature of  
          the fault is unknown, as is its relationship with the Hosgri  
          fault, located about three miles offshore of Diablo Canyon.  The  
          discovery of the second fault raises new questions about the  
          seismic risks of Diablo Canyon; in particular the plant's  
          vulnerability to a major disruption in electricity generation  
          due to an earthquake, which could impact the reliability of the  
          state's energy supply and greatly increase costs to ratepayers.   
          The author believes that as PG&E explores the feasibility of  
          relicensing Diablo Canyon, it is imperative that both PG&E and  
          the state understand the economic and reliability risks of the  
          plant's extended operation.

           1)Background  

          The state is preempted by the federal Nuclear Regulatory  
          Commission (NRC) in regulating all aspects of the radiological  
          safety of nuclear power.  However, the state has much broader  
          authority to set electricity generation priorities based on  
          economic, reliability, and environmental concerns. The CPUC  
          relied on this authority in establishing a framework for  
          considering the cost- effectiveness of renewing PG&E's NRC  
          license for Diablo Canyon after it sought approval for $16.8  
          million in ratepayer fund for a license renewal feasibility  
          study (see below for more discussion).

          Similarly, the Legislature relied on the above authority in  
          passing AB 1632 (Blakeslee), Chapter 722, Statutes of 2006,  
          which required the CEC to evaluate existing literature on the  
          potential vulnerability of Diablo Canyon and the San Onofre  
          Nuclear Generating Station (SONGS) to a major disruption due to  
          aging or a major seismic event and the impact of this disruption  








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          on system reliability, public safety, and the economy.   
          According to the CEC, an earthquake at Diablo Canyon or SONGS  
          could result in a shutdown of plant operations from as little as  
          a week to longer periods depending on the extent and location of  
          any damage.  Because these plants contribute a significant  
          portion of the state's electricity supply (12 percent), a  
          long-term plan is critical to prevent or significantly reduce  
          the risk of a major disruption and to be prepared should one  
          occur.

          With respect to Diablo Canyon, the CEC found, among other  
          things, that:

             (a)  A sufficient safety margin exists in the plant design to  
               accommodate ground motion from the Hosgri Fault, even  
               though this motion was greater than had been anticipated  
               when the plant was designed;
             (b)  The deep geometry of faults directly underlying Diablo  
               Canyon is not sufficiently understood to rule out a 6.5  
               magnitude earthquake directly beneath the plant similar to  
               the one that occurred in 2003 in San Simeon.  It is  
               necessary to better define the deep geometry of bounding  
               faults and to better understand the lateral continuity of  
               these fault zones.  Although these fault zones are unlikely  
               to replace the Hosgri Fault as the dominant source of  
               seismic hazard at the plant, improved characterizations of  
               these fault zones would refine estimates of the ground  
               motion that is likely to occur at different frequencies.   
               This information may be significant for engineering  
               vulnerability assessments.
             (c)  In addition to PG&E's Long-Term Seismic Study Program,  
               further study using advanced technology may help resolve  
               remaining uncertainties.  For example, high quality  
               three-dimensional geophysical seismic reflection mapping  
               could resolve questions about the characterization of the  
               Hosgri Fault and might change estimates of the seismic  
               hazard at the plant (CEC recommendation).  Similarly,  
               direct imaging of the subsurface structure could determine  
               if faults exist near the site that do not break to the  
               surface and could also serve to refine knowledge of the  
               deep geometry, continuity, and interaction of poorly  
               expressed faults.
             (d)  PG&E should assess the implications of a San Simeon-type  
               earthquake beneath Diablo Canyon.  This assessment should  
               include expected ground motions and vulnerability  








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               assessments for safety and non safety-related plant systems  
               and components that might be sensitive to long-period  
               motions in the near field of an earthquake rupture (CEC  
               recommendation).
             (e)  Evaluate the seismic vulnerability and reliability  
               implications for the nuclear plants' non-safety related  
               systems, structures, and components from changes to seismic  
               design standards that have occurred since the plants were  
               designed and built. Such an analysis should consider the  
               International Atomic Energy Agency Standards and Safety  
               Reports and any retrofits that the plant owners may have  
               undertaken and should focus on those plant systems or  
               components whose failure could lead to extended outages.

          It is important to note that these findings and recommendations  
          preceded the November 2008 discovery of a new fault closer to  
          the plant.  The discovery promoted the CEC to revise some of the  
          above recommendations.

           1)Public Utilities Commission Defers to CEC Findings and  
            Recommendations  

          Diablo Canyon and SONGS have been operating for roughly half of  
          their 40-year initial NRC license term.  In 2007, PG&E sought  
          from the PUC (and was granted) $16.8 million in ratepayer funds  
          to explore the feasibility of relicensing Diablo Canyon for  
          another 20 years until the early to mid-2040s.  In its decision,  
          the PUC required PG&E to submit an application by June 30, 2011  
          on whether to pursue license renewable; the application must  
          include a license renewal feasibility study to address whether  
          renewal is cost effective and in the best interests of PG&E's  
          ratepayers.  The PUC also required PG&E to incorporate the  
          findings and recommendations of the CEC's AB 1632 study in its  
          feasibility study.

          However, according to the AB 1632 report, PG&E is on record  
          stating that it does not interpret the PUC's decision as  
          requiring PG&E to include in its feasibility study issues that  
          are outside the scope of NRC's license renewal proceeding.   
          Moreover, PG&E states that the decision only requires it to  
          consider, not implement, the CEC's recommendations.  PUC staff  
          concurs.  PG&E believes that many of the recommendations in the  
          AB 1632 report are already being addressed in ongoing programs  
          subject to NRC review.  However, as the SSC has noted, "?NRC  
          regulations have not kept pace with rapid changes in other  








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          local, state and international seismic safety standards for  
          nuclear plants.  The NRC does not regulate non-safety-related  
          portions of nuclear power plants, so utilities are left to  
          self-regulate non-nuclear safety and reliability."

          At issue is the CEC's recommendation that PG&E should conduct  
          high quality three-dimensional geophysical seismic reflection  
          mapping, which PG&E believes is not necessary given the  
          two-dimensional mapping it is currently doing.  This bill does  
          not compel PG&E to do such mapping; it only requires PG&E to  
          seek funding for studies "deemed urgent" by the CEC or SSC.   
          Since this is a vague standard,  the author and committee may  
          wish to consider whether:  1) it should be interpreted by the  
          CEC, at a public hearing, in consultation withthe Seismic  
          Vulnerability Advisory Team (SVAT), comprised of experts from  
          the CEC, California Geologic Survey, SSC and California Coastal  
          Commission, who provided technical review and input during the  
          development of the AB 1632 report; and 2) whether the SVAT  
          should to oversee the development of study or survey designs and  
          conduct or facilitate a peer review of the studies or surveys.

          Additionally,  the author and committee may wish to consider  
          whether  to require the PUC to determine whether additional  
          studies and peer review should be paid for from the $16.8  
          million already approved by the PUC or whether PG&E should be  
          required to file another application to seek additional funding.  
           Moreover, since the license renewal feasibility study is  
          intended to inform whether renewal of the NRC licenses is cost  
          effective and in the best interests of PG&E's ratepayers, the  
          PUC should be required to consider whether the study's June 30,  
          2011 deadline should be extended to accommodate the time  
          required for additional studies.

          Finally, this bill requires the PUC to allow PG&E to fully  
          recover costs associated with seismic studies and any retrofits  
          that may presumably be required without any limits or criteria  
          specifying the reasonableness of such costs.   The author and  
          committee may wish to consider whether  the bill should maintain  
          the PUC's authority to evaluate the reasonableness of the costs  
          associated with any retrofits.

           2)Proposed Amendments  

          Page 3, line 1-4 should read:









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          (d) The July 2007 magnitude 6.8 Japan Sea earthquake located 16  
          kilometers from  Tokyo   Toyota  Electric Power Company's  
          Kashiwazaki-Kariwa Nuclear Power Plant shut down the facility at  
          a cost of some hundreds of millions of dollars per month.

          Page 3, lines 11-18 should read:

          (a)  (1)  Pacific Gas and Electric Company shall  conduct   seek  
          funding for  seismic fault  and other hazard or vulnerability  
           studies  or surveys   and seismic retrofits   at Diablo Canyon  
          Nuclear Power Plant  , deemed urgent by the Energy Commission  , at  
          a public hearing no later than April 1, 2010, in consultation  
          with the California Geologic Survey, Seismic Safety Commission,  
          and California Coastal Commission   or the Seismic Safety  
          Commission  , in furtherance of the recommendations made by the  
          Energy Commission pursuant to paragraph (8) of subdivision (a)  
          of Section 25303 of the Public Resources Code, in order to  
          maintain reliable operation of the electrical grid and reduce  
          impacts to customer rates as a result of a seismic  or other  
          catastrophic  event.

           (2) No later than 60 days after the Energy Commission acts  
          pursuant to paragraph (1), the commission shall determine  
          whether Pacific Gas and Electric should pay for the surveys or  
          studies and peer review from the funds made available for a  
          license renewal feasibility study pursuant to Decision 07-03-044  
          and whether the June 30, 2011 deadline for the feasibility study  
          should be extended.  If deemed reasonable and in the public's  
          interest, the commission may amend Decision 07-03-044 to  
          supplement these funds or require Pacific Gas and Electric  
          Company to file an application to seek additional funding for  
          the surveys or studies and peer review.
           
           (3) The Energy Commission, California Geologic Survey, Seismic  
          Safety Commission, and California Coastal Commission may  
          participate in the development of study or survey designs.
           
          Page 3, lines 19-33 should read:

          (b) (1) The Energy Commission  , in consultation with the  
          California Geologic Survey, Seismic Safety Commission, and  
          California Coastal Commission,  shall conduct  or facilitate  a  
          peer review of any studies  or surveys  conducted pursuant to  
          subdivision (a)  within 120 days of receipt of a final study or  
          survey  .








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          (2) The Energy Commission may enter into agreements with  
           qualified   academic and industry groups of  scientists with  
          expertise in fault imaging and character and behavior studies to  
          conduct an external scientific peer review of the scientific  
          basis for any fault study  or survey  .

          (3) The Energy Commission shall include the findings and  
          recommendations of  any studies or surveys conducted pursuant to  
          subdivision (a)   the peer review of any fault study  in the  
          integrated energy policy report as updates pursuant to  
          subparagraph (D) of paragraph (8) of subdivision (a) of Section  
          25303 of the Public Resources Code.

           (c)   (d)  The commission shall allow Pacific Gas and Electric  
          Company to fully recover  in its electric power procurement rates  
          all reasonable  costs  associated with the   from all of their  
          electrical customers for investments in fault  ,  surveys or  
           studies  and peer review pursuant to subdivision (a).    and  
          seismic retrofits pursuant to this section.    If the commission  
          requires Pacific Gas and Electric Company to file an application  
          to seek additional funding, pursuant to subdivision (a), the  
          commission shall issue an expedited decision within 120 days of  
          filing the application.
           
           REGISTERED SUPPORT / OPPOSITION  :

           Support 
           
          Alliance for Nuclear Responsibility
          Janice Peters, Mayor, City of Morro Bay
          Environment California
          Two individuals

           Opposition 
           
          Pacific Gas and Electric Company
           

          Analysis Prepared by  :  Dan Chia / NAT. RES. / (916) 319-2092