Electric Utilities Seeking Nuclear Bailout are “California Dreaming”

Oct. 30, 1998

Electric Utilities Seeking Nuclear Bailout
are “California Dreaming”

New Report Analyzes Costs to Consumers, Dangers of Giveaway

WASHINGTON, D.C. — One-fifth of the money Californians pay each month for electricity goes toward subsidizing nuclear power plants that otherwise might not be able to continue operating in the newly deregulated electric utility market, according to a new Public Citizen report released today.

“This ?free capital? gouged from consumers with the help of the California Assembly will be used to stifle competition and innovation, and prolong the use of dirty power plants,” said Wenonah Hauter, director of Public Citizen?s Critical Mass Energy Project, which released the report. “This is one of the biggest consumer rip-offs in recent memory.”

Voters can overturn this $14 billion ratepayer subsidy by voting YES on Proposition 9 next Tuesday. The eyes of the nation will be watching as Californians shape the future of electric utility deregulation with their vote.

The report, California Dreaming: The Bailout of California?s Nuclear Industry, analyzes the economic effect of the nuclear bailout mandated by California?s deregulation law (AB 1890) and the safety record of the state?s nuclear plants. It found that:

  • The $14 billion nuclear bailout, representing about 20 percent of each customer?s electric bill, dwarfs the amount secured under AB 1890 for renewable energy and energy efficiency.
  • Operating subsidies totaling $2.2 billion insulate California?s nuclear reactors from competition, ensuring that these non-competitive energy sources will continue to operate well into the future, despite serious safety concerns.
  • Many safety problems at Diablo Canyon and San Onofre plants have existed since the original licensing, and there has been an alarming increase in the number of whistleblower allegations at these plants.

“The utility executives claim that if Prop 9 is approved, these nuclear plants will have to shut down,” Hauter said. “Well, so be it! Californians never wanted these reactors perched precariously along the fault-ridden California coastline in the first place. If they can?t compete economically and maintain absolute safety, then they should be decommissioned.”

The report points out that construction of the Diablo plant resulted in cost overruns of 1,620 percent. Now ratepayers are being asked to pay for this mismanagement.

“The fact is, the investors who own these utilities have reaped great returns over the years,” Hauter said. “But they don?t want to assume the risks that go along with earning profits. They want captive ratepayers to bail them out. That?s not competition.”

Supporters of the bailout point to a “deal” that was struck with utilities under which almost $2 billion over four years will go toward low-income assistance, research and development, energy efficiency and renewable energy programs. Out of this fund, $540 million will benefit renewable energy technologies, or 0.7 percent of a consumer?s total electric bill.

Unfortunately, it is clear that the public subsidy for nuclear energy far outweighs any benefits from the support of renewable energy and efficiency, the report says. The result is a policy that encourages costly, expensive and dangerous nuclear power over cheaper, sustainable technologies that steer us toward a sustainable future.

The funds for energy efficiency have actually been cut back to half the 1994 level. To make matters worse, these funds will be placed in control of the utilities rather than an independent administrator, creating the potential for cross-subsidization of other utility projects and a potential for misuse of energy efficiency funds. After all, the more efficient energy users are, the less electricity the utility will sell.

Proposition 9 protects consumers by removing the bad nuclear investments from the electric bill, while retaining the small renewable energy and energy efficiency investments.