California lawmakers rejected Gov. Gavin Newsom’s bid to include another $400 million for Pacific Gas & Electric Company in the state budget, in a political standoff that began in 2022 with a bargain to keep the Diablo Canyon Power Plant open.
Newsom cut a $1.4 billion deal to keep the nuclear plant operational until 2030 amid record summer temperatures and a budget surplus in 2022. Now that the state is facing a $45 billion deficit, legislative leaders cut the money in their budget proposal last week
In hearings and in a flurry of letters with the state’s Department of Finance, lawmakers have raised concerns that the state may never be paid back for hundreds of millions in loans to PG&E despite promises of reimbursement — at a time when core government services are being cut.
“It feels like we’re being taken advantage of here,” said Sen. Benjamin Allen, D-El Segundo, in a budget committee hearing last month.
“A lot of the terms that we were sold with regards to energy needs and alternative energy have not been fulfilled by the administration. We were all asked to support it although many of us didn’t want to… and now we’re being asked for this loan with conditions I’m not clear on.”
The governor’s office declined to comment on the issue. Newsom’s $288 billion proposed budget is sparking tough negotiations with lawmakers and painful cuts to core government services, including Medi-Cal insurance for low income residents.
The budget process was a far more unworried affair in 2022, when, at Newsom’s urging, the legislature approved $1.4 billion in loans to keep the Diablo Canyon plant open to help maintain reliability of the state’s power grid. PG&E had been preparing to shutter it in 2025.
The measure, SB 846, authorized $600 million from the state’s general fund to keep the plant open with a plan to approve the rest later. PG&E was expected to repay the state loan with a federal grant from the Department of Energy.
But the federal grant amounted to only $1.1 billion. Now the Newsom administration’s department of finance is urging lawmakers to approve a final $400 million loan disbursement to the utility, an amount that lawmakers say will unfairly be left to taxpayers.
Diablo Canyon, located near Avila Beach in San Luis Obispo County, is California’s last nuclear power plant. The 2,240-megawatt plant began operating in 1985 and supplies roughly 9% of the state’s energy.
At the time of the deal, Newsom argued that allowing Diablo Canyon to provide electricity until 2030 is needed to preserve grid reliability as California transitions to renewable energy and weans itself off fossil fuels.
Matt Freedman, staff attorney at The Utility Reform Network, said it’s unclear that the plant is needed to keep the lights on especially as more clean energy sources come online. Yet the state’s bill to keep it open is growing.
“Legislators were told that the $1.4 billion would be completely repaid by the federal government. That turned out not to be true, and the delta between the promise and reality is getting larger as time goes on,” he said.
He called Newsom’s arrangement with PG&E back in 2022 a “last second, stinky political deal that provided a series of benefits and protections to PG&E shareholders,” he said, including performance based disbursements for investors.
“Every dollar that goes to Diablo Canyon is a dollar that doesn’t go to some other essential government service.”
The Legislature must pass a budget by June 15, an agreement that could serve as a placeholder while leaders continue to negotiate with Newsom. The governor must sign the budget bill by June 27.
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