PG&E 2007 Annual Report Download - page 57

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The CPUC authorized the Utility to recover the $1.74 bil-
lion estimated SmartMeter™ project cost, including an esti-
mated capital cost of $1.4 billion. The $1.74 billion amount
includes $1.68 billion for project costs and approximately
$54.8 million for costs to market the SmartMeter™ tech-
nology. In addition, the Utility can recover in rates 90%
of up to $100 million in costs that exceed $1.68 billion
without a reasonableness review by the CPUC. The remain-
ing 10% will not be recoverable in rates. If additional costs
exceed the $100 million threshold, the Utility may request
recovery of the additional costs, subject to a reasonableness
review. Through 2007, the Utility has spent an aggregate
of $253 million, including capital costs of $213 million,
to install the SmartMeter™ system.
On December 12, 2007, the Utility fi led an application
with the CPUC requesting approval to upgrade elements of
the SmartMeter™ program at an estimated cost of approxi-
mately $623 million, including approximately $565 million
of capital expenditures. The Utility has proposed to install
upgraded electric meters with associated devices that would
offer an expanded range of service features for customers
and increased operational effi ciencies for the Utility. These
upgraded electric meters and devices would provide energy
conservation and demand response options for electric
customers. In addition, the upgraded electric meters are
designed to facilitate the Utility’s ability to incorporate
future advanced metering technology innovations in a timely
and cost-effective manner. The Utility also requested that the
CPUC authorize the Utility to recover the estimated costs
of the upgrade through electric rates beginning in 2009.
PG&E Corporation and the Utility cannot predict whether
the CPUC will approve its application.
Diablo Canyon Steam Generator Replacement Project
In November 2005, the CPUC authorized the Utility to
replace the steam generators at the two nuclear operat-
ing units at Diablo Canyon (Units 1 and 2). The CPUC
authorized the Utility to recover costs of this project of up
to $706 million from customers without further reason-
ableness review; if costs exceed this threshold, the CPUC
authorized the Utility to recover costs of up to $815 million,
subject to reasonableness review of the full amount. As of
December 31, 2007, the Utility has spent approximately
$300 million, including progress payments under con-
tracts for the eight steam generators that the Utility has
ordered. The Utility anticipates the future expenditures will
be approximately $373 million. The Utility began install-
ing four of the new steam generators in Unit 2 during the
refueling outage that began in February 2008 and expects
to complete installation in April 2008. The remaining new
generators in Unit 1 are expected to be installed in 2009.
The Utility has obtained two coastal development permits
from the California Coastal Commission to build temporary
structures at Diablo Canyon to house the new generators
as they are prepared for installation and for certain offl oad-
ing activities. The Utility also has a conditional use permit
from San Luis Obispo County to store the old generators
on site at Diablo Canyon. On January 10, 2007, the Coastal
Law Enforcement Action Network fi led a complaint in the
Superior Court for the County of San Francisco against
both the California Coastal Commission and the Utility
alleging that the California Coastal Commission violated
the California Coastal Act, the California Environmental
Quality Act, and the San Luis Obispo Certifi ed Local
Coastal Program when it approved the permits without
requiring the Utility to commit to undertake certain pro-
posed or otherwise feasible mitigation measures. The com-
plaint requests that the court (1) fi nd that the approval of
the permits was “illegal and invalid,” (2) order the com-
mission to set aside and vacate its approval, and (3) issue a
permanent injunction to prohibit the Utility from engaging
in any activity authorized by the permits until the California
Coastal Commission complies with the judgment that the
court may render. The court denied the request for a perma-
nent injunction in April 2007. Further proceedings on the
complaint have been delayed at the request of all parties in
support of ongoing discussions regarding informal resolu-
tion of the complaint. PG&E Corporation and the Utility
believe that the permits were legally and validly approved
and issued.
If the replacement of the steam generators in Unit 1 is
delayed, the Utility could incur additional costs to operate
and maintain the old steam generators in Unit 1 until
they can be replaced, which would delay and extend project
completion dates. If the Utility is not able to replace the
generators in Unit 1, the Utility would be required to cease
operations at Diablo Canyon Unit 1 and procure power
from other sources when the generators are no longer oper-
able in conformance with operating standards. The Utility
would also have to pay for all work done in connection with
the design and fabrication of the four steam generators and
a pro-rated profi t up to the time the performance under the
contracts is completed or the contracts are terminated. Based
on the progress of the project and productive settlement
discussion, the Utility does not expect to incur these addi-
tional costs. In the unlikely event that replacement of the
generators in Unit 1 is halted or delayed, the Utility would
request to recover in customer rates any additional costs.