The U.S. Department of Energy approved rule changes Thursday meant to allow California’s last nuclear plant to apply for federal aid so it can keep operating beyond its scheduled retirement date.  

Pacific Gas and Electric plans to shut down its Diablo Canyon Power Plant in phases starting in 2024, but Gov. Gavin Newsom is hoping to keep it running to deal with potential capacity shortfalls over the next four summers.

Newsom’s cabinet secretary Ana Matosantos wrote to Energy Secretary Jennifer Granholm in May, asking that DOE amend its eligibility criteria for the Biden Administration’s $6 billion Civil Nuclear Credit Program (CNC), funded under November’s Infrastructure Investment and Jobs Act. The program is meant to assist nuclear plants at risk of closure for economic reasons.

In an April guidance, DOE had said CNC funding is for nuclear plants that participate in competitive energy markets and do not recover more than 50% of their costs from cost-of-service ratemaking. PG&E recovers its Diablo Canyon costs from customers under rate cases approved by the California Public Utilities Commission and would not qualify for CNC funding under that interpretation.   

In her letter, Matosantos requested that DOE’s guidance be changed to exclude the cost-of-service requirement. The state is facing a shortfall of 1,800 MW during peak summer hours after solar goes offline, she wrote. Diablo Canyon provides 8.5% of in-state generation and is needed beyond its planned retirement date to maintain reliability as it transitions to 100% carbon-free energy, she said.

The department’s April guidance was “overly broad, especially where cost-of-service does not cover the costs for which funding is being sought.” For Diablo Canyon to “extend operations, it would incur significant transition costs over the next four years to perform necessary studies, invest in plant enhancements, and obtain licenses and permits. Yet there is no existing cost recovery mechanism for those transition costs” when PG&E sells output from the plant into CAISO’s wholesale electricity market, she said.  

Extending operations at Diablo Canyon would “cause significant economic losses” for PG&E “of the sort that the Civil Nuclear Program was designed to address,” Matosantos contended.

DOE issued a proposed guidance amendment for public comment by June 17, and on Thursday it announced it was making the changes requested by Newsom’s office “given the request’s potential applicability to reactors nationwide.”

“The amended guidance revises the eligibility criteria to replace the requirement that a nuclear reactor applying for credits under the CNC Program not recover more than 50% of its costs from cost-of-service regulation or regulated contracts,” the department’s Office of Nuclear Energy said in a statement. “This change affects the eligibility of reactors who may apply in the first round of awards.”

DOE also extended the application deadline for the first round of CNC funding to Sept. 6.  

“The amended CNC Guidance supports the intent of President Biden’s bipartisan infrastructure law to keep the reactors online that sustain local economies and today provide our nation’s single largest source of carbon-free electricity,” Assistant Secretary for Nuclear Energy Kathryn Huff said in DOE’s statement.

PG&E has yet to commit to keeping Diablo Canyon open and has previously said it plans to move forward with the plant’s scheduled retirement, but in comments to DOE it agreed with the governor’s requested rule changes and asked for a 75-day extension to apply for CNC funding. A budget trailer bill signed last week by Newsom allocates $75 million toward keeping the plant open.