Credit: File photo

Diablo Canyon’s closure may not have as disastrous an economic impact as previously thought.

San Luis Obispo County is on an economic staircase, which has been rising quite consistently. But in 2016, Pacific Gas & Electric (PG&E) announced the 2024 and 2025 closure of the Diablo Canyon Power Plant, the second largest employer in the county.

Upon the closure’s announcement, the 2013 PG&E Economic Impact Report found that Diablo Canyon had a local economic impact of almost a billion dollars on the county. A billion dollars lost each year seemed to spell the end of any economic growth or activity in the county. 

However, a report released in June 2019 from the California Public Utilities Commission (CPUC) — the agency that regulates privately owned public utilities — found that the closure may create a “positive shock” for the economy. The report states that the closure could boost the local economy, bringing in hundreds of millions of dollars each year with thousands of jobs created.

The study estimates the annual economic loss post-closure will only be around $77 million, with about 2,900 jobs lost. Pre-closure the county will lose tax income as PG&E’s assets at Diablo Canyon decrease in value. But what does that mean?

As an independently owned utility, PG&E is taxed on their power generating assets through a unitary tax, which currently generates about $23 million for the county. Diablo Canyon supports school districts, city operations, civil programs and many more aspects of the county.

As the closure approaches, the assets’ values drop. To offset this decline, the CPUC authorized PG&E a one-time payout of $85 million to the county.

The study estimates that until the closure, this $85 million payout will boost the economy, increasing economic output by about $40 million annually. The study also determined that for the 10 years post-closure, due to the decommissioning process, the county’s economic output will be increased by about $724 million annually, with an increase of about 4,900 jobs annually.

“I’d just really encourage people to evaluate their individual interests and, I think, take a more balanced perspective on the opportunities,” Berkeley economics professor and one author of the study David Roland-Holst said.

However, assistant county administrator Guy Savage — who is heading the county’s efforts in minimizing the negative effects of the closure — said he believes the CPUC report was based on incorrect assumptions.

Savage said the study’s assumption that the $85 million payout will all be spent before the closure is incorrect. As an example, he said the school district is placing $10 million of it in an endowment, which will not be spent before the closure.

Additionally, Savage said the report assumes the funds will be used for decommissioning and deconstruction post-closure, which is currently estimated to cost about $4.8 billion and take 10 years. However, Savage said it is known that decommissioning will take longer than 10 years.

Savage also described how the decommissioning process will likely be aided in a large part by out of state workers specializing in power plant decommissioning. The report assumes these workers will spend their income locally, but Savage explained the majority of their money will likely go back home.

The report also assumes the estimated switch from the current 1,500 highly paid workers to a post-closure 4,000 lower-paid workers will have a positive economic impact because there will be more jobs. Savage argues that a highly paid worker in a million-dollar house is vastly different than a lower-paid decommissioning/deconstruction worker struggling to pay rent.

Savage said there are many more flawed assumptions the report makes, which, if considered differently, would radically change the predicted effects. If the inputs to the report’s calculations change, the outputs will change as well.

“It’s not gonna be a positive shock,” Savage said.

However, Savage said he agrees with the report in that he does not foresee the closure causing an economic apocalypse.

Savage explained that independent of the study’s findings, the level of the closure’s negative or positive impact is dependent on the county’s and community’s proactiveness.

President and CEO of the San Luis Obispo Chamber of Commerce Jim Dantona explained how the county and community cannot just wait to see what happens.

“[We are] making sure whatever we do when the time comes that [Diablo Canyon] has to get shut down, that we’re planning enough in advance that there won’t be this giant gap in economic activity,” Dantona said.

Leading up to the closure, Dantona and his colleagues are working to coordinate with the county’s cities, schools and other interested parties to ensure those groups are doing their best to foster economic development, using their respective portions of PG&E’s $85 million dollar payout to minimize the closure’s negative economic impact.

Both Savage and Dantona said the main takeaway from the CPUC study is not that the closure will have a “positive shock,” but that the impact of the closure will not be disastrous – if the community acts now.

Dantona stressed the importance of repurposing the Diablo Canyon facilities and lands to benefit the county instead of letting them go to waste or be lost. Savage said the only way the Diablo Canyon land and assets can be reused is if a viable, actionable plan is created and brought forward.

The Hourglass Project, a self-described “economic development action tank,” has been working on such a plan.

The Hourglass Project studies economic impacts, works to create job opportunities and fosters economic development from Vandenberg Air Force Base to Camp Roberts. Vice President of Strategy for Hourglass Andrew Hackleman said they will release a comprehensive economic action plan in January.

This plan will detail ways the closure of Diablo Canyon, the development of Vandenberg into a space launch hub and other such Central Coast opportunities can be used for economic development and job creation.

Hackleman said because so many governing bodies have a say over reuse decisions, a key aspect of the plan will be to create a land trust. The trust will be able to plan, control and manage land and asset reuse.

“It’s one thing to talk about ideas . . . it’s a whole other thing to actually create the environments in which we can pursue those ideas,” Hackleman said.

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