Testimony of Jack Keenan- Senior Vice President Generation and Chief Nuclear Officer, Pacific Gas and Electric Co.

Before the California Senate Energy, Utilities and Communications Committee

December 10, 2007

Good morning/afternoon. I am Jack Keenan, Senior Vice President of Generation and the Chief Nuclear officer at PG&E. Thank you for the opportunity to speak to you today about the role the Diablo Canyon Power Plant plays in providing safe, clean and reliable power to California.

Diablo Canyon is a 2-unit nuclear power plant located in San Luis Obispo County. The power production facility and support operations sit on approximately 700 acres adjacent to the Pacific Ocean between Avila Beach and Montano del Oro State Park. In total the Diablo Canyon site includes approximately 12,000 acres of magnificent California coastline. We take great pride in our environmental stewardship of these lands and have been recognized for our efforts to preserve and protect the environment of this special land. This land to the north and south also provides and excellent safety and security buffer for the plant.

Together our two units produce about 2,300 megawatts of electricity, enough to meet the needs of 2.3 million households in northern and central California. Another way to explain the output: Diablo Canyon provides approximately 20% of the electricity delivered into the PG&E service territory. Units 1 and 2 began commercial operation in 1985 and 1986 respectively and have consistently ranked among the best in the industry in safety and reliability. We are licensed by the Nuclear Regulatory Commission (NRC) to operate for a 40 year period.

At PG&E, safety is our core value. We have a responsibility to operate the plant in a safe and efficient manner. While we have an excellent record in this field, I want to assure the committee that we are never satisfied with our performance and are always searching for way to improve.

We have an extensive emergency planning effort that is ongoing which involves the NRC, California Office of Emergency Services and local government led by the County of San Luis Obispo. We were strong supporters of AB 292 by our local Assemblyman Sam Blakeslee, recently signed into law by the Governor, which expands the Nuclear Preparedness Program for another 10 years. This continues the ongoing local preparations in the unlikely event of an incident at the plant. Lessons learned from these ongoing drills and meetings are incorporated into our updated plans.

Over the past two years, we’ve had very strong performance in several key areas. From a safety standpoint, our 2006 occupational radiation exposure was the lowest in station history. We also have a strong focus on employee and contractor safety at the plant.

Also in 2006 we provided 18.5 billion kilowatt-hours of electricity to our customers, another station record. We were able to do that with a 94.8% capacity factor, which is a measure of how much energy we produce compared to our maximum rated capacity. Those of us at Diablo Canyon take great pride in those percentages. That provides reliable, base load power to the California Energy grid which is also critical for system and statewide stability. We are also proud in our delivered cost per kwH to the customer. Through the efforts of all the dedicated employees at PG&E and Diablo Canyon we over the years have controlled our operational costs to be able to deliver power to our customers at a cost of between 3.5 and 3.8 cents per kWh. We do expect those costs to rise slightly in the future as we prepare for some major projects, but we estimated that in the next several years to be right about the 4 cent per unit average. In addition during non peak hours, Diablo Canyon often serves as the source of power for PG&E’s Helms Pumped Storage system in the mountains east of Fresno. This is a two lake hydro system where during peak demand water runs through the turbines at Helms into a lower reservoir. At night we reverse the turbines using Diablo Canyon power to pump water back up into the higher lake where we can again use the resource.

Early this year we executed our most efficient Unit 1 refueling outage, which was our second best outage ever. And also this year we earned the top performance rating from the Institute of Nuclear Power Operations, an industry oversight organization that evaluates all U.S. nuclear plants against the best operational and organizational practices in the industry.

That INPO rating is very important because it is a reflection of the overall quality of our operations and, ultimately, plant safety `We understand and accept our responsibility to operate in a manner that protects the health and safety of our employees, our families and our communities. To that end, nuclear, radiological, public and personnel safety are an integral of our culture.

The committee has asked me to address the issue of spent fuel. Since commencing operations, all used fuel from operations has been held at Diablo Canyon in our two spent fuel pools, located in the secure area of the plant. We are nearing completion on the construction of our interim storage facility, on site, that will allow moving some of the fuel from the spent fuel pools to a location adjacent to the power plant. This will involve a system known as dry cask storage. The industry has been moving to this technology over the years and we have received approval from the NRC to do the same with other agency approvals ranging from the CPUC on cost recovery, to the California Coastal Commission for site work, and local government. We are prepared to manage the spent fuel on site until such time as the federal government opens a national repository. I do not need to advise the committee of the issues involved with the DOE obligation to handle the spent fuel. We are confident in our ability to manage this issue until such time as the federal government resolves the situation. As a note to the committee, we have started a similar program at our Humboldt Bay site, which is in the initial stages of decommissioning.

And for the record, SMUD, the Sacramento Municipal Utility District has completed the transfer of their spent fuel to a dry cask system located at the Rancho Seco park south of Sacramento.

We also recognize the special challenges we face operating in an area susceptible to seismic activity. Diablo Canyon is one of the strongest industrial facilities, or facility of any type, in the United States and is built to withstand ground movement much greater than what experts believe is possible in that location. Through our long-term seismic program, led by one of the world’s most respected seismologists, we have thoroughly studied and understand the geological characteristics of the Diablo Canyon site, and we study seismic events around the world in an effort to make our program even stronger. As with our general safety program we continually look for improvement. Our seismologist- Mr. Lloyd Cluff has extensive contact with state and national officials, is frequently in contact with the California Seismic Safety Commission and most recently was part of a delegation that traveled to Japan to study the recent earthquake in that country and the impacts on Japan’s nuclear industry.

Additionally, our highly trained security force ensures that the facility is strongly protected against anyone intent on harming the plant or our employees. Diablo Canyon has always been one of the most secure industrial facilities in the nation. Since the events of Sept. 11, 2001, Diablo Canyon and other nuclear facilities have increased their ability to protect the plant even more by increasing the size of our force, enhancing surveillance and weaponry, and improving our training and qualification requirements. I’m sure the committee can understand that I cannot get into the specifics of our security program, but I want to assure the committee that it is rigorous, dedicated and coordinated with federal, state and local law enforcement.

We have some important work ahead of us to help ensure that Diablo Canyon remains one of the premier generating stations in the nation. PG&E is showing its commitment to the long-term safe and reliable operation of Diablo Canyon by investing in major equipment upgrades and construction projects.

• We have recently replaced our low pressure turbines on both units with more efficient turbines that have allowed us to increase the amount of electricity we can provide to our customers.
• We will complete construction of our interim spent fuel storage installation early next year, and we are on track to begin safely storing our used fuel in that facility next fall.
• Early in 2008 we will replace the four Unit 2 steam generators, and will do the same on Unit 1 the following year. These are the largest construction projects at Diablo Canyon since initial construction.
• We are also preparing to replace the reactor heads on both units in 2009 and 2010.

In addition to the safe, clean and reliable energy we produce at Diablo Canyon, the station provides tremendous economic benefits to San Luis Obispo County.

• Diablo Canyon is the largest employer in the county, providing about 1,400 jobs.
• Many of those employees extend well into the community as volunteers, mentors and other community act ivies providing thousands of hours of support to local organizations.
• Those jobs on average pay 60% more than the county average.
• Diablo Canyon is also the largest tax payer in the county, providing $27 million per year to state and local government, which support schools, libraries and other public services.
• Overall Diablo Canyon adds over $650 million to the county economy every year.

And finally, Diablo Canyon plays a major role in helping California meet its energy needs without emitting harmful greenhouse gases and in helping San Luis Obispo County thrive. We are proud at PG&E that our native generation is approximately 90% carbon free. The majority of that comes from Diablo Canyon, the balance from our extensive hydro-electric system. If Diablo Canyon were not in operation the estimated replacement conventional gas fired generation would create some 8-10 million tons of greenhouse gas (GHG) emissions annually.

Thank you for the opportunity to appear before the committee.

I would be pleased to answer any questions you may have.