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As presented in the Utility’s 2005 NDCTP, the estimated
nuclear decommissioning cost for Diablo Canyon Units 1
and 2 and Humboldt Bay Unit 3 is approximately $2.27 bil-
lion in 2008 dollars (or approximately $5.42 billion in future
dollars). These estimates are based on the 2005 decommis-
sioning cost studies, prepared in accordance with CPUC
requirements. The Utility’s revenue requirements for nuclear
decommissioning costs (i.e., the revenue requirements used
by the Utility to make contributions to the decommission-
ing trust funds) are recovered from customers through a
non-bypassable charge that the Utility expects will continue
until those costs are fully recovered. The decommissioning
cost estimates are based on the plant location and cost
characteristics for the Utility’s nuclear power plants. Actual
decommissioning costs may vary from these estimates as a
result of changes in assumptions such as decommissioning
dates, regulatory requirements, technology, and costs of labor,
materials, and equipment.
The estimated nuclear decommissioning cost described
above is used for regulatory purposes. However, under SFAS
No. 143 requirements, the decommissioning cost estimate
is calculated using a different method in accordance with
SFAS No. 143. Under GAAP, the Utility adjusts its nuclear
decommissioning obligation to refl ect the fair value of
decommissioning its nuclear power facilities and records
this as an asset retirement obligation on its Consolidated
Balance Sheets. The total nuclear decommissioning obliga-
tion accrued in accordance with GAAP was approximately
$1.4 billion at December 31, 2008 and $1.3 billion at
December 31, 2007. The primary difference between the
Utility’s estimated nuclear decommissioning obligation as
recorded in accordance with GAAP and the estimate pre-
pared in accordance with the CPUC requirements is that
the estimated obligation calculated in accordance with
GAAP incorporates various potential settlement dates for
the obligation and includes an estimated amount for third-
party labor costs in the fair value calculation. Differences
between amounts collected in rates for decommissioning the
Utility’s nuclear power facilities and the decommissioning
obligation recorded in accordance with GAAP are refl ected
as a regulatory liability. (See Note 3 of the Notes to the
Consolidated Financial Statements.)
NOTE 13: NUCLEAR
DECOMMISSIONING
The Utility’s nuclear power facilities consist of two units
at Diablo Canyon (“Diablo Canyon Unit 1” and “Diablo
Canyon Unit 2”) and the retired facility at Humboldt Bay
(“Humboldt Bay Unit 3”). Nuclear decommissioning requires
the safe removal of nuclear facilities from service and the
reduction of residual radioactivity to a level that permits ter-
mination of the Nuclear Regulatory Commission (“NRC”)
license and release of the property for unrestricted use. The
Utility makes contributions to trust funds (described below)
to provide for the eventual decommissioning of each nuclear
unit. The CPUC conducts a Nuclear Decommissioning Cost
Triennial Proceeding (“NDCTP”) every three years to review
the Utility’s updated nuclear decommissioning cost study
and to determine the level of Utility trust contributions and
related revenue requirements. In the Utility’s 2005 NDCTP,
the CPUC assumed that the eventual decommissioning of
Diablo Canyon Unit 1 would be scheduled to begin in 2024
and be completed in 2044; that decommissioning of Diablo
Canyon Unit 2 would be scheduled to begin in 2025 and be
completed in 2041; and that decommissioning of Humboldt
Bay Unit 3 would be scheduled to begin in 2009 and be
completed in 2015. A premature shutdown of the Diablo
Canyon units would increase the likelihood of an earlier
start to decommissioning. The 2008 NDCTP application
was originally scheduled to be fi led on November 10, 2008;
however, on April 29, 2008, the CPUC extended the fi ling
date to April 3, 2009.