PG&E 2011 Annual Report Download - page 110

NOTE 15: COMMITMENTS AND CONTINGENCIES (Continued)
The Utility and other nuclear power plant owners sued the DOE to recover costs that they incurred to build
on-site storage facilities. The Utility sought to recover $92 million of costs that it incurred through 2004. After
several years of litigation, the U.S. Court of Federal Claims awarded the Utility $89 million on March 30, 2010. The
DOE filed an appeal of this decision on May 28, 2010. The appeal was argued in the Federal Circuit Court of
Appeals on March 10, 2011. The Utility is awaiting a decision on the appeal and has not recorded any receivable for
the award.
Additionally, on August 3, 2010, the Utility filed two complaints against the DOE in the U.S. Court of Federal
Claims seeking to recover all costs incurred since 2005 to build on-site storage facilities. The Utility estimates that it
has incurred at least $205 million of such costs since 2005. Any amounts recovered from the DOE will be credited to
customers.
Nuclear Insurance
The Utility has several types of nuclear insurance for the two nuclear generating units at Diablo Canyon and
Humboldt Bay Unit 3. The Utility has insurance coverage for property damages and business interruption losses as a
member of Nuclear Electric Insurance Limited (‘‘NEIL’’). NEIL is a mutual insurer owned by utilities with nuclear
facilities. NEIL provides property damage and business interruption coverage of up to $3.2 billion per incident
($2.7 billion for property damage and $490 million for business interruption) for Diablo Canyon. In addition, NEIL
provides $131 million of property damage insurance for Humboldt Bay Unit 3. Under this insurance, if any nuclear
generating facility insured by NEIL suffers a catastrophic loss, the Utility may be required to pay an additional
premium of up to $40 million per one-year policy term. NRC regulations require that the Utility’s property damage
insurance policies provide that all proceeds from such insurance be applied, first, to place the plant in a safe and
stable condition after an accident and, second, to decontaminate the plant before any proceeds can be used for
decommissioning or plant repair.
NEIL policies also provide coverage for damages caused by acts of terrorism at nuclear power plants. Certain
acts of terrorism may be ‘‘certified’’ by the Secretary of the Treasury. If damages are caused by certified acts of
terrorism, NEIL can obtain compensation from the federal government and will provide up to its full policy limit of
$3.2 billion for each insured loss. In contrast, NEIL would treat all non-certified terrorist acts occurring within a
12-month period against one or more commercial nuclear power plants insured by NEIL as one event and the
owners of the affected plants would share the $3.2 billion policy limit amount.
Under the Price-Anderson Act, public liability claims that arise from nuclear incidents that occur at Diablo
Canyon, and that occur during the transportation of material to and from Diablo Canyon are limited to $12.6 billion.
As required by the Price-Anderson Act, the Utility purchased the maximum available public liability insurance of
$375 million for Diablo Canyon. The balance of the $12.6 billion of liability protection is provided under a
loss-sharing program among utilities owning nuclear reactors. The Utility may be assessed up to $235 million per
nuclear incident under this program, with payments in each year limited to a maximum of $35 million per incident.
Both the maximum assessment and the maximum yearly assessment are adjusted for inflation at least every five
years. The next scheduled adjustment is due on or before October 29, 2013.
The Price-Anderson Act does not apply to public liability claims that arise from nuclear incidents that occur
during shipping of nuclear material from the nuclear fuel enricher to a fuel fabricator or that occur at the fuel
fabricator’s facility. Such claims are covered by nuclear liability policies purchased by the enricher and the fuel
fabricator as well as by separate supplier’s and transporter’s (‘‘S&T’’) insurance policies. The Utility has a S&T
policy that provides coverage for claims arising from some of these incidents up to a maximum of $375 million per
incident.
In addition, the Utility has $53 million of liability insurance for Humboldt Bay Unit 3 and has a $500 million
indemnification from the NRC for public liability arising from nuclear incidents, covering liabilities in excess of the
$53 million of liability insurance.
If the Utility incurs losses in connection with any of its nuclear generation facilities that are either not covered
by insurance or exceed the amount of insurance available, such losses could have a material effect on PG&E
Corporation’s and the Utility’s financial condition, results of operations, and cash flows.
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