In a momentous decision with far-reaching consequences, Pacific Gas and Electric Co. has announced it will not pursue license renewal for the two reactors at Diablo Canyon nuclear power plant and will close it in 2025 — ending a tumultuous 31-year relationship with the community and leading to an annual economic loss of about $1 billion locally.

The closure is part of an agreement with labor and environmental organizations announced Tuesday in which the utility agrees to increase investment in energy efficiency, renewable power and electricity storage to offset the power that will no longer be produced by the nuclear plant.

Closing Diablo Canyon will mean the end of an era in nuclear power in California. Diablo is the last nuclear power plant operating in the state, after the 2012 shutdown of San Onofre Nuclear Generating Station south of San Clemente.

“California’s energy landscape is changing dramatically with energy efficiency, renewable and storage being central to the state’s energy policy,” PG&E’s Chairman Tony Earley said in a prepared statement. “As we make this transition, Diablo Canyon’s full output will no longer be required.”

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Diablo Canyon employs nearly 1,500 workers and contributes more than $1 billion to the local economy, according to the Economic Vitality Corp. It is San Luis Obispo County’s largest private industry employer, with an average annual salary of $157,000 in 2014, according to PG&E.

SHARE COPY LINK Take a closer look at Diablo Canyon nuclear power plant near Avila Beach. California's last operating nuclear power plant will close in 2025, owner Pacific Gas & Electric Co. has announced.

The plan is contingent upon approval by the California Public Utilities Commission. It was reached with the agreement of the International Brotherhood of Electrical Workers Local 1245, the Coalition of California Utility Employees, Friends of the Earth, the Natural Resources Defense Council, Environment California and the Alliance for Nuclear Responsibility.

Diablo Canyon employees were notified of the closure plan early Tuesday morning and a series of staff meetings were scheduled throughout the day, as well as a mid-morning all-employee conference call, officials said.

PG&E officials said its decision to close Diablo Canyon was influenced by several factors. Among them a state policy requiring utilities to increase renewables in their portfolios to 50 percent by 2030; the subsequent growth of solar and wind production; and the loss of customers because of community choice aggregation, which allows local jurisdictions to group power purchases to lower prices.

San Luis Obispo County supervisors said the decision to shut the plant down in 2025 did not come as much of a surprise because of the plant’s seismic safety issues. Supervisor Adam Hill, whose district includes Diablo Canyon, said he is relieved the community has an additional eight years to transition away from the nuclear plant.

“The worst possible thing would be for the plant to shut down immediately,” he said. “This gives us an opportunity to prepare for it.”

“This is an historic agreement,” said Erich Pica, president of Friends of the Earth. “It sets a date for the certain end of nuclear power in California and assures replacement with clean, safe, cost-competitive, renewable energy, energy efficiency and energy storage.”

The key elements of the agreement are as follows:

▪ The utility will withdraw its application with the federal Nuclear Regulatory Commission to renew the plant’s two operating licenses.

▪ The plant will continue to operate the two reactors until their licenses expire Nov. 2, 2024, and Aug. 26, 2025.

▪ During this 9-year transition period, PG&E will replace the plant’s energy with new greenhouse gas-free energy.

▪ PG&E does not believe customer rates will increase because implementing the plan to close the plant will have a lower cost than license renewal and operating the plant through 2044.

▪ PG&E will pay San Luis Obispo County nearly $50 million to offset declining property taxes through 2025.

▪ PG&E will provide 55 percent of its total retail power sales with renewable energy by 2031. That exceeds the state mandate, which requires 50 percent renewable by that date. Currently, the company’s renewable power percentage is about 30 percent.

The utility also agreed to help its employees and the community transition through the closure.

This includes incentives to retain employees until 2025, retraining of employees for the decommissioning process and severance payments when their employment ends.

“We are incredibly proud of the men and women who have made Diablo Canyon one of the finest nuclear stations in the country and who, in doing so, have provided our state GHG-free energy for three decades,” Earley said. Greenhouse gases are emissions that deplete the ozone layer and cause global warming.

The agreement to close the plant is contingent upon an extension of the plant’s cooling water system by the State Lands Commission, which expires in 2018. The environmental groups that are party to the agreement have pledged to support the license extension at the commission’s hearing June 28.

The groups also agree to support an application by PG&E to renew its license to operate the plant’s used fuel storage plant. The utility is expected to apply for that license renewal no later than five years before the plant shuts down.

The agreement also is contingent upon approval by the state Public Utilities Commission of PG&E’s plans for replacing Diablo Canyon’s power with greenhouse-gas-free resources. The PUC also must confirm that PG&E’s investment in Diablo Caanyon will be recovered by the time the plant closes in 2025, as well as cost recovery for employee and community-transition benefits.

9 Percentage of California’s in-state power that’s generated by Diablo Canyon 3,286 Estimated number of jobs that could be lost by closing Diablo Canyon 97.3 Percentage that the nearly $26 million in annual property tax revenues could decline after the closure

The agreement to close the plant in 2025 was widely praised by environmental groups, including the Natural Resources Defense Council, which helped negotiate the closure agreement.

“Energy efficiency and clean renewable energy from the wind and sun can replace aging nuclear plants — and this proves it,” NRDC President Rhea Suh said.

Tom Dalzell, business manager for IBEW Local 1245, said in a prepared statement that the union fought to keep the plant operational until its licenses expire in order to protect the plant’s workforce.

“Together with the long transition and the very strong retention package, we will be able to keep these highly trained and motivated workers,” he said. “This is a victory in our ongoing struggle to make sure middle-class jobs are a central part of the emerging clean and renewable energy economy.”

Diablo Canyon accounts for about 9 percent of California’s in-state power generation, 6 percent of the state’s total energy mix and about 20 percent of the power in PG&E’s service area. The utility serves about 16 million customers in Northern and Central California.

PG&E applied with the Nuclear Regulatory Commission in 2009 to renew the operating licenses for Diablo Canyon for an additional 20 years. However, the utility put the applications on hold after the nuclear disaster in Japan in 2011 in order to study the earthquake faults surrounding the plant. Critics of the plant also noted that Diablo Canyon’s highly radioactive used reactor fuel will be stored at the plant for the foreseeable future.

A 2013 Cal Poly study estimated that closing Diablo Canyon would cost 3,286 jobs, including positions at the plant and in local communities hurt by the ripple effect of the closure. The study also estimated that the nearly $26 million in annual property tax revenues would decline by 97.3 percent.

The plant’s two reactors began operation in May 1985 and March 1986.