PG&E 2008 Annual Report Download - page 59

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limited cost recovery to the initial capital cost estimate. The
CPUC also ruled that in the event the fi nal capital costs are
lower than the initial estimate, half of the savings must be
returned to customers. If actual costs exceed the cost limits
(except for additional capital costs attributable to operational
enhancements), the Utility would be unable to recover such
excess costs. The forecasted initial capital cost will be trued up
in the Utility’s next GRC following the commencement of
operations to refl ect actual initial capital costs. Permitting
or construction delays and project development or materials
cost overruns could cause the project costs to exceed the
CPUC-adopted cost limits. As of December 31, 2008,
the Utility had incurred $216 million for the development
and construction of the Colusa Generating Station. Of this
amount, the Utility has incurred $204 million during 2008.
Subject to meeting operational performance requirements
and other conditions, it is anticipated that the Colusa
Generating Station will commence operations in 2010.
Humboldt Bay Generating Station
On September 24, 2008, the CEC issued its fi nal decision
authorizing the construction of a 163 MW power plant to
re-power the Utility’s existing power plant at Humboldt Bay,
which is at the end of its useful life. Demolition of existing
structures on the site is complete and the contractor began
preparing the site for construction in December 2008.
The CPUC authorized the Utility to recover an initial
capital cost for the Humboldt Bay Generating Station of
approximately $239 million for the construction, which can
be adjusted to refl ect any actual incentive payments made
to, or liquidated damages received from, the contractors
through notifi cation to the CPUC, but without a reasonable-
ness review. The Utility is authorized to seek recovery of
additional capital costs that are attributable to operational
enhancements, but the request will be subject to the CPUC’s
review. The Utility also is permitted to seek recovery of
additional capital costs subject to a reasonableness review.
The forecasted initial capital cost will be trued up in the
Utility’s next GRC following the commencement of opera-
tions to refl ect actual initial capital costs. Permitting or
construction delays and project development or materials
cost overruns could cause the project costs to exceed the
CPUC-adopted cost limits. As of December 31, 2008, the
Utility had incurred $61.5 million for the development and
construction of the Humboldt Bay Generating Station. Of
this amount, the Utility incurred $55 million during 2008.
Subject to obtaining required permits, meeting construc-
tion schedules, operational performance requirements, and
other conditions, it is anticipated that the Humboldt Bay
project will commence operations in 2010.
DIABLO CANYON STEAM GENERATOR
REPLACEMENT PROJECT
In November 2005, the CPUC authorized the Utility to
replace the steam generators at the two nuclear operating
units at Diablo Canyon (Units 1 and 2) and recover costs
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, 2008, the Utility has spent approximately
$554 million, including progress payments under contracts
for the eight steam generators that the Utility has ordered.
The Utility anticipates the future expenditures will be
approximately $146 million. The Utility installed four of the
new steam generators in Unit 2 during the refueling outage
that began in February 2008 and ended in April 2008. The
extended refueling outage to replace the steam generators
in Unit 1 began in January and is expected to end in early
April 2009.
NEW GENERATION FACILITIES
During 2008, the Utility was engaged in the development of
the following generation facilities to be owned and operated
by the Utility:
Gateway Generating Station
In November 2006, the Utility acquired the equipment,
permits, and contracts related to a partially completed
530 MW power plant in Antioch, California, referred to
as the Gateway Generating Station. The CPUC has authorized
the Utility to recover estimated capital costs of approximately
$385 million to complete the construction of the facility and
as of December 31, 2008, the Utility has incurred approxi-
mately $350 million. Of this amount, the Utility incurred
$221 million during 2008. The Gateway Generating Station
reached full load commercial production on January 4, 2009,
and is expected to reach fi nal project completion at the end
of the fi rst quarter of 2009.
Colusa Generating Station
On June 12, 2008, the CPUC gave its fi nal approval for
the Utility to construct the Colusa Generating Station, a
657 MW combined cycle generating facility to be located in
Colusa County, California. Final environmental permitting
was approved on September 29, 2008 and construction began
on October 1, 2008.
The CPUC authorized the Utility to recover an initial
capital cost for the Colusa Generating Station of approxi-
mately $673 million, which can be adjusted to refl ect any
actual incentive payments made to, or liquidated damages
received from, the contractors through notifi cation to the
CPUC, but without a reasonableness review. The CPUC
authorized the Utility to seek recovery of additional capital
costs attributable to operational enhancements, but otherwise