Banning Nukes: $4 Billion CA Budget Hit

JUNE 1, 2011


It’s been 22 years since Rancho Seco nuclear power plant generated its last megawatt. The facility, 25 miles southeast of downtown Sacramento, was the casualty of a public referendum in which a majority of voters in the state’s capital city decided the plant should be shut down.

Ben Davis Jr., an anti-nuke activist, is credited with first suggesting the idea of idling Rancho Seco’s two reactors. Now, two decades later, the Santa Cruz resident has come out of retirement to gather signatures for a state ballot measure that would shutter California’s two remaining nuclear power plants — San Onofre in San Diego County and Diablo Canyon in San Luis Obispo County.

Rancho Seco’s closure cost its owner, Sacramento Municipal Utility District, some $660 million, a portion of which almost certainly was passed along to its ratepayers. It also permanently removed the nuclear plant’s 913 megawatts from the grid — capacity that, if fully utilized, was enough to serve most of SMUD’s business and residential customers.

The fallout from decommissioning both San Onofre and Diablo Canyon would be exponentially greater than Rancho Seco’s shut down. The two nuclear power plants generate 15 percent of California’s electricity. Removing that output from the state grid would have an impact on the state comparable to the electricity crisis of the early 2000s.

Electricity Crisis

Most California residents remember those bad old days.

Because state utilities could not generate enough electricity to meet growing customer demand, the utilities had to purchase megawatts from out-of-state providers at markups of us much as 2,000 percent.

Yes, there was evidence of market manipulation by out-of-state electricity providers. But those providers would not have been able to get away with their alleged price gouging if California was not so reliant on imported electricity; if the state’s utilities had been generating enough megawatts to meet homegrown demand.

Davis, described as “eccentric, stubborn” by one of his friends in California’s anti-nuke community, has obviously ignored the lesson of the early 2000s. His ballot measure is predicated on the dubious notion that California can readily replace the electricity generated by San Onofre and Diablo Canyon by erecting more solar arrays and building more wind farms.

California’s non-partisan Legislative Analyst’s Office disagrees. In a recent report, it notes that nuclear power supplies “base load” energy to the state’s electricity grid. What that means is that, unlike solar and wind, which are intermittent sources of megawatts, nuclear provides a reliable, uninterrupted power source.

If Davis somehow succeeds in removing San Onofre’s 2,350 megawatts and Diablo Canyon’s 2,240 megawatts from the grid, residents throughout the state can look forward to regular rolling blackouts, the LAO warns.

Meanwhile, decommissioning California’s two remaining nuclear power plants will drive up electricity rates from Sacramento to San Diego.

Part of that is simply a matter of supply and demand. If the state eliminates 15 percent of its electricity output, prices are certain to climb. The other part is that the anti-nuke community will insist that the lost 15 percent be replaced by solar and wind. Those renewable energy sources cost more than twice as much per kilowatt hour as nuclear.

$4 billion Budget Hit

Then there’s the very real possibility that Southern California Edison and San Diego Gas & Electric, owners of San Onofre, and Pacific Gas & Electric, owner of Diablo Canyon, could seek compensation from the state of California for the losses incurred by the involuntary shut down of their plants. The LAO’s Office estimates that the losses could total more than $4 billion.

None of the costly scenarios laid out by the LAO, or by pointy headed opinion writers like yours truly, matters to Davis and California’s anti-nuke zealots. If they can shut down the state’s last two nuclear power plants, they are quite willing to subject California residents to the nation’s highest electricity rates.



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  1. Wayne Lusvardi
    Wayne Lusvardi 3 June, 2011, 13:49

    Mr. Perkins: In 2001 I served on theCalifornia Energy Crisis Task Force for one of the largest wholesale water agencies. I wrote a white paper on how to manage the price shocks of the crisis. A couple of misconceptions in your article require comment:

    1. The so-called market manipulation was mainly by public utilities such as LA DWP, City of Pasadena, SMUD, etc. not private outside energy suppliers. Example: City of Pasadena made a cool $100 million gaming the crisis.

    2. Many of the so-called gaming maneuvers by Enron and other energy providers were actually attempts to curtail grid congestion and thus LOWER prices and avert brownouts and blackouts.

    3. The probabilities of phasing out nuke power plants along the California coast are small because the more green power mandated by the state (now 33% mandated) the more backup power will be required because wind and solar power cut be short circuited by nature (clouds or air pressure change) in a moment. One of the likely sources of such instantaneous back up power is California’s nuke plants.

    4. The 2001 Energy Crisis was not caused by deregulation but by overregulation and a confluence of events that was later called a “perfect storm.” In 1996 the Clinton-led EPA mandated California clean up smog by 2001 or face cut off of Federal funds. No coincidence that California’s energy crisis was in 2001 after old polluting power plants were forced into mothballing.

    5. There was not one, but two energy crises in 2001. The first was a Republican oriented policy of deregulation hoping to cut smog by outsourcing power from other states that would create a competitive market that would also lower prices at the same time. This failed for a variety of reasons but mainly because a new Democratic legislature and Governor in 2001 pulled the plug on it so that Republican Texas wouldn’t be making money on California.

    The second crisis was price controls that were put into place after deregulation was scuttled. Price controls were intended to induce a pricing fever (bubble) in order to pay off the $42 billion in unpaid bonds on old power plants mothballed due to EPA mandates. This is what most of us experienced as the “energy crisis” with rolling brownouts and blackouts and skyrocketing prices. It was totally manipulated by the state including manipulating the media that Enron was to blame.

    6. The $42 billion in unpaid debts on mothballed power plants was rolled into a mega-bond in 2003 and is due to be paid off in 2012. AB 32 – Global Warming Solutions Act – kicks in in 2012 to capture all this market for green power at helfty price increases.

    7. The claims of environmentalists of moral and environmental superiority of green power is specious. Wind and solar power are not only unpredictable and require duplicate back up, but they don’t clean the air either. Wind and solar farms do not replace out of state coal power plants and because they are located in remote desert areas do not reduce air pollution in urban air basins (smog traps).

    8. There presently is a mandate from the State Water Resources Board to eliminate ocean water cooling by nuke and conventional power plants along the coastline at considerable expense ($2 billion?). The alternative is either air cooled systems or importing water from hundreds of miles away to bring all the way to the coastal power plants at a cost of mega billions. The whole intent of this is to render nuke power uncompetitive in the market and thus green power can compete with it.

    9. Oil and gas fracking is a wild card and may result in a future energy crisis that would make the 2001 crisis look like a pimple. The only way that California can hold off this crisis is to erect blockades and barriers to competition from outside cheap energy. But markets have an uncanny way of influencing prices. It would be like trying to be self sufficient as to oil but only to find that Saudi Arabia still controls the worldwide price of oil.

    Expect more soon on the above from this writer.
    Best regards,
    Wayne Lusvardi

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  2. AJ
    AJ 21 June, 2011, 00:12

    Not a word about Ft Calhoun, Fukushima. or Chernobyl?


    Reply this comment
  3. AJ
    AJ 21 June, 2011, 00:26

    nuclear power has been massively subsidised by the govt and would/could not survive without massive market manipulation via these subsidies.

    That bit about Enron? Are you joking?

    Reply this comment
  4. PG&E pipe dreams
    PG&E pipe dreams 6 December, 2011, 09:29

    Hey Ben Davis, how about you jump in a hamster wheel so you can generate electricity for me? I will pay you $1 an hour.

    Or you can shovel coal into a broiler, after you build one for me and supply the coal.
    Or you can just leave my nuclear plants alone so that everybody can have electricity.

    Reply this comment

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