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PG&E to Pay $85 million to SLO County, Cities, School District for Diablo Canyon Closure

Utility will also pay between $37.5 million and $62.5 million for emergency planning efforts over the next 15 to 25 years

The PG&E Diablo Canyon plant in san Luis Obispo County Click to view larger
The PG&E Diablo Canyon plant in san Luis Obispo County (Joe Johnston / San Luis Obispo Tribune/MCT)

PG&E has agreed to pay $85 million to seven local cities, San Luis Coastal Unified School District and San Luis Obispo County to support those agencies after Diablo Canyon nuclear power plant’s proposed closure in 2025. That’s up from $49.5 million that it originally proposed.

In addition, the utility will pay between $37.5 million and $62.5 million for emergency planning efforts over the next 15 to 25 years. That brings the entire settlement package to between $122.5 million and $147.5 million.

“We’re satisfied we can move forward in a way that will address the challenges in front of us,” San Luis Obispo City Manager Katie Lichtig said when discussing the settlement announced late Monday.

The settlement comes after the county, school district and the cities protested the original amount, saying it did not adequately consider the potential $1 billion impact on San Luis Obispo County’s economy.

In June, when PG&E announced its plans to shutter California’s only remaining nuclear power plant, the utility proposed paying a cumulative $49.5 million to San Luis Obispo County to make up for losses in property taxes, as well as allocating $350 million to an employee retention and retraining program that would aid Diablo Canyon workers through the closure and decommissioning.

Many worried the loss of Diablo Canyon would have a much larger impact on the local economy than that, however.

Under the new proposal:

▪  $75 million would go to offset property tax losses by the school district, county and 69 other special districts. Of that, San Luis Coastal — which now gets $8 million a year — would get about $36.8 million over the next nine years until the plant closes in 2025. It plans to put $2 million a year for the first five years into an endowment fund to help offset revenue losses after the plant closes. The original proposal called for the district to get about $24.3 million.

▪ $10 million would go for economic development efforts in the county and cities. This could include incentives, loans and grants for businesses, as well as help with infrastructure.

▪  Between $37.5 million and $62.5 million would go toward local emergency planning efforts until all spent fuel is in dry cask storage and the two nuclear reactors are fully decommissioned.

▪  The agreement reiterates that PG&E will make no decisions on reuse or sale of the land surrounding the plant, including Wild Cherry Canyon, until it has completed a decommissioning plan with input from the community.

▪  Negotiations can reopen after the release of an economic impact report required by a state bill authored by Sen. Bill Monning, D-Monterey, and outgoing Assemblyman Katcho Achadjian.

The agreement is subject to approval by the parties affected, as well as the California Public Utilities Commission. The PUC is expected to consider it in mid-2017. The ratepayers would foot the bill for the entire cost.

In light of the agreement, San Luis Coastal Superintendent Eric Prater said the district may not have to close schools as he had originally feared.

“By establishing certainty about what the school district will receive over the next nine years, the agreement gives us needed breathing room for making what will still be a very difficult transition when Diablo finally closes in 2025,” Prater said. “Now, with this baseline of certainty, San Luis Coastal can develop a thoughtful, long-term transition plan.”

After PG&E announced its closure plan last summer, the county and San Luis Coastal applied to be intervenors in the state legal proceedings to consider PG&E’s application, followed soon after by a coalition of six of the seven cities in San Luis Obispo County — all but Grover Beach.

The county Board of Supervisors will receive an update on the settlement agreement Dec. 6. The school district board of trustees will consider it the same day. City councils are expected to review it by mid-December.

The $10 million economic development fund, which will be used to replace lost high-paying jobs, will be divided into three parts: a $400,000 study to evaluate strategies; $5.76 million to the coalition of cities; and $3.84 million to the county, which will share part of that with Grover Beach.

“In reaching this agreement, PG&E has recognized the need to help our region navigate an uncertain economic future,” the mayors for the coalition of cities said in a joint statement Monday afternoon.

“We are pleased with this phase of the process. The transition to a post-Diablo era will be challenging, but the Economic Development Fund will help facilitate the planning and action required to support the future economic vitality of our communities.”

The funds could be used to encourage local companies to expand or recruit businesses to San Luis Obispo County, helping to at least partially fill the anticipated hole in the economy once the power plant closes. Officials are especially concerned because of the plant’s head-of-household jobs; in 2014, the plant paid about 1,500 employees on average an annual salary of $157,000.

The idea to contribute economic development funds isn’t without precedent.

Windham County, Vermont — where the Vermont Yankee nuclear power plant closed in 2014 — received $10 million from utility company Entergy Corp. for incentives and loans to businesses looking to expand or settle in the region, plus grants to nonprofit groups for job training and marketing assistance to small businesses.

The plan hasn’t been without its drawbacks: Some have criticized how the funds are being distributed, saying too much has gone toward grants, as opposed to revolving loans that would eventually be repaid, allowing the program to continue after Entergy’s financial support ends.

Vermont Yankee was the first time a closure agreement for a nuclear power plant included substantial funds earmarked specifically for economic recovery.

[Click here for more stories from the San Luis Obispo Tribune.]

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