Lawmakers, regulators review Diablo Canyon extension, contingency plans and grid upgrades

SACRAMENTO — California senators and leaders of the state’s energy agencies met at a Senate oversight hearing to review the status of Senate Bill 846 implementation, Diablo Canyon Power Plant operations and the state’s progress on electricity reliability and affordability as extreme weather and growing demand reshape planning.

The hearing, convened by the Senate Committee on Energy, Utilities and Communications, brought the California Energy Commission (CEC), California Public Utilities Commission (CPUC), Department of Water Resources (DWR), California Independent System Operator (CAISO) and PG&E before legislators to explain recent procurement, contingency reserves and where gaps remain as the state transitions to low‑carbon resources.

Why it matters: SB 846 authorized a five‑year extension of Diablo Canyon’s operating licenses and set reporting, mitigation and financing conditions intended to bridge near‑term reliability while the state scales clean resources. Lawmakers said they want assurance that contingencies and agency actions reduce the risk that taxpayers and ratepayers will shoulder unexpected costs or reliability shortfalls.

Agency officials said progress on clean resource procurement and battery storage has materially improved near‑term reliability since the rotating outages of August 2020, but they also flagged remaining risks tied to rare, extreme events and to the completion of outstanding implementation steps from SB 846.

“It's been 5 years since California experienced unexpected rotating outages in August 2020,” said Senator Roger W. (Becker), chair of the committee, opening the hearing and framing the panel’s focus on “grow, share and shift” — build more resources, share across larger markets and shift demand through flexibility.

What officials reported - Resource additions: The agencies said recent procurement and interconnection activity has driven large new buildouts of solar and battery storage. Officials cited a record year with nearly 7,000 megawatts of new renewable and zero‑carbon resources in one year and more than 12,000 megawatts of storage nameplate capacity added since 2020. The CPUC told the committee it has issued procurement orders totaling about 18.8 gigawatts of new capacity to meet expected needs without relying on fossil‑fuel procurement. - Operating outlook for 2025: CAISO and agency leaders described 2025 as “cautiously optimistic.” CAISO President Elliot Mainzer summarized the summer as stable so far and said the battery fleet “has become an essential part of the reliability equation in California,” but he warned a widespread West‑wide heat wave coincident with a major fire could still create emergency conditions. - Contingencies and the strategic reserve: Delphine Ho, deputy director at DWR, said DWR currently manages a strategic electricity reserve of a “little over 3,000 megawatts today,” most of which are once‑through‑cooling thermal units contracted as short‑term backstops. Officials described roughly 4,000 megawatts of contingency supply available when needed (including those DWR‑managed plants and other demand‑flexibility and emergency programs). - Demand flexibility and DSGS: Agencies described demand flexibility as a multi‑pronged strategy to reduce peak exposure. The CEC and CPUC described a 7,000‑megawatt statewide goal for load‑shifting by 2030 that mixes rate‑driven load‑shape changes (~3,000 MW), demand‑response resources eligible for Resource Adequacy, and operational emergency programs. The CEC reported the Distributed Statewide Grid Support (DSGS) program has attracted more than 1 gigawatt of subscription and produced about 650 megawatts of response in a recent test event.

Diablo Canyon specific issues - Loan and federal credits: PG&E and DWR reiterated that the State’s $1.1 billion loan intended to support the plant’s extended operations is expected to be repaid principally via the Department of Energy civil nuclear credit payments and, secondarily, from any market revenues in the final year of operations. Senators pressed for a firmer guarantee that the outstanding roughly $300 million liability would not fall to taxpayers if federal funding or final‑year market revenues did not materialize. DWR said DOE credits are the primary repayment path and that some credits would flow into escrow for loan repayment, but panel members said the repayment path requires continued oversight. - Safety, seismic review and materials testing: PG&E told the committee it has filed for a 20‑year federal license renewal with the Nuclear Regulatory Commission (NRC) and that the NRC’s June 2025 safety evaluation and environmental analyses concluded Diablo Canyon can operate safely up to 2045 subject to standard regulatory conditions. PG&E said reactor‑vessel surveillance sampling is ongoing and that recent NRC findings support safe operation; the company also said the final capsule analysis from a spring sample would provide an additional verification and is expected in 2026. The Diablo Canyon Independent Safety Committee and outside reviewers have reviewed the plant’s seismic studies and maintenance assessments; PG&E and regulators said those reviews have not identified conditions that would preclude extended operation but recommended continued work in specific areas. - Spent fuel and local impacts: PG&E said the site has room for long‑term spent fuel storage, and described an approach combining pool storage and dry cask storage that, in the utility’s view, provides capacity for decades. Separately, lawmakers raised concerns about the local fiscal impacts stemming from the unitary tax treatment that was amortized under the original 40‑year life; some county revenues decline under the five‑year extension scenario and local officials and legislators asked for a state solution to preserve local funding. - Coastal and water permits: PG&E said it has an active application with the California Coastal Commission and discussions with regional water boards; company representatives told the committee they expect the Coastal Commission and water‑quality certification decisions in early 2026 but acknowledged the permitting timeline and completeness reviews have been a multiyear process.

Market and transmission issues - Interconnection and transmission: CAISO described major interconnection‑queue reforms enacted in 2024 to sort and study the projects most ready to build; the ISO said about 60,000 megawatts of transmission inventory currently exists to support procurement over the next several years but that coordinated planning and faster permitting remain priorities. The CPUC has adopted a general order to accelerate transmission permitting and is piloting measures to reduce duplicative environmental review and speed up upgrades to existing facilities. - Regional market (EDAM/EIM): Agency staff and several lawmakers discussed ongoing work on broader regional market approaches. Officials said larger market footprints should increase resource sharing, lower curtailment and reduce costs; they also identified risks the Legislature must weigh about market rules and governance if a multi‑state market proceeds.

What remains unresolved Legislators repeatedly pressed the panel on four outstanding items: (1) the repayment certainty for the state loan tied to Diablo Canyon, (2) completion and publishing of any remaining reactor‑vessel surveillance results, (3) the schedule and content of Coastal Commission and water‑quality approvals, and (4) a longer‑term plan to replace once‑through‑cooling backstops with cleaner, cost‑effective alternatives. Several senators also asked for an updated quantitative analysis — triggered by AB 2368 and other direction — showing the modeled probability of blackout events across near‑term and medium‑term horizons; witnesses said further modeling work is underway and promised to return with results.

Quotes from participants - "We will be cautiously optimistic about the summer," said Sibagunda, vice chair of the California Energy Commission, summarizing the agencies' view of 2025 reliability under current planning standards. - "The battery storage fleet has become an essential part of the reliability equation in California," said Elliot Mainzer, president and CEO of CAISO. - "We have enough space on Diablo Canyon to store 60 years of spent nuclear fuel," said Maureen Zawalek, vice president of nuclear business and technical services at PG&E. - "We have a little over 3,000 megawatts today in the reserve," DWR Deputy Director Delphine Ho told the committee about the state’s strategic electricity reserve.

The bottom line State agencies say procurement and storage growth have materially reduced the short‑term probability of outages compared with the 2020–2022 period, but they also warned that rare, coincident extreme events (a West‑wide heat wave coincident with major fire activity) remain a credible risk. Legislators signaled they will continue oversight of loan repayment and permitting, press for the DSGS and other demand‑flexibility programs to be funded and scaled, and seek additional modeling and reporting to quantify remaining reliability risk and fiscal exposures.

Next steps Committee members asked agencies and PG&E to return with: written clarifications on loan repayment scenarios and escrow procedures; updates on the reactor‑vessel surveillance results; a status timeline for Coastal Commission and water‑quality certifications; and the results of interagency reliability modeling AB 2368 requested. The committee also reiterated interest in regional market design, transmission permitting pilots and monitoring the DSGS pilot’s operational performance.

An edited transcript and agency follow‑up materials are expected to be posted by the committee and used to inform further hearings this fall.