PG&E, which reported a 64 percent increase in net income Tuesday, wants its customers to pay $706 million -- and possibly more -- to overhaul the utility's Diablo Canyon nuclear power plant.

State regulators will hold hearings on the utility's request next month. A decision could come by year's end. At stake is nothing less than California's energy future.

PG&E says the money, which it would take in through an almost 2 percent increase in monthly bills, is needed to replace Diablo Canyon's aging steam generators. They produce power from water heated by nuclear fission.

The utility says this would keep Diablo Canyon operational for at least the next 20 years and thus provide juice for power-thirsty homes and businesses. Otherwise, PG&E says, it may have to close the plant as soon as 2013, creating the potential for a new energy crisis.

"Diablo generates roughly 20 percent of the electricity that PG&E customers use," noted John Nelson, a spokesman for the utility.

Opponents of the plan, including the Sierra Club and Greenpeace, say the hundreds of millions of dollars sought by PG&E could just as easily be spent on constructing state-of-the-art, non-nuclear power plants.

They argue that diverting the money away from Diablo Canyon could represent the start of a far-reaching plan for statewide energy self- sufficiency based on a combination of natural-gas-fired plants and alternative energy sources.

'Better uses for money'

This approach, however, could end up costing almost twice the amount PG&E is seeking.

"There are a lot better uses for the money PG&E wants," said Rochelle Becker of Mothers for Peace, an anti-nuclear watchdog group spearheading the opposition to the utility's plans. "Why should we just hand it over to them?"

Pacific Gas and Electric Co. submitted its request for the funds in January as squabbling continued with regulators over the utility's bankruptcy proceedings.

In its filing, PG&E asked the California Public Utilities Commission to approve passing along $706 million in Diablo Canyon maintenance charges to ratepayers.

In the 1990s, the PUC required PG&E to cover such expenses on its own. But now, after regulatory changes, the utility can fund plant upgrades and maintenance through approved rate increases.

Passing along such costs to ratepayers is common in the utility business and is how generators have been replaced at other nuclear plants nationwide.

Yet PG&E also sought approval in January "to seek recovery in rates of any amounts above the CPUC-specified reasonable and prudent cost" for the replacement work, subject to a PUC "reasonableness review."

"That's not normally how we do things around here," observed Truman Burns, a regulatory analyst in the PUC's Office of Ratepayer Advocates. "Normally the cost gets nailed down in advance."

In April, Southern California Edison said $680 million will have to be spent within five years to replace generators at the San Onofre nuclear power plant it co-owns with San Diego Gas & Electric Co.

San Onofre repairs

The San Diego utility disputes whether the work is justified at this time, leaving it unclear who will pay for the repairs. Edison, which owns 75 percent of San Onofre, estimates the work would result in customers' monthly bills rising by about 2 percent.

Numerous utilities, including Edison, sued a leading maker of steam generators, Westinghouse Electric Corp., in the 1980s and '90s for faulty equipment. Most of the suits were settled out of court.

Diablo Canyon uses Westinghouse generators. But PG&E's Nelson said the equipment has met expectations and in fact has outlasted machinery at other nuclear plants.

Referendum on the future

Next month's hearings are intended to focus on whether the Diablo Canyon project offers ratepayers good value for money. But they're also shaping up to be a referendum on the plant's future.

The 2,200-megawatt coastal facility near San Luis Obispo generates enough power to light more than 2 million homes.

If the steam generators are replaced as per PG&E's wishes, the plant is licensed to remain operational until 2025. PG&E is already studying whether to seek an extension of that license.

Critics point to the potential danger of having a nuclear plant several miles from an earthquake fault. They observe that PG&E says it will store nuclear waste -- spent fuel rods -- on a nearby hillside because there's nowhere else to put it.

Similarly, the utility says it would also store Diablo Canyon's old generators in concrete structures on a hillside above the plant if regulators OK the replacement work. Each of the eight generators is 68 feet tall and weighs 800,000 pounds.

Each will remain radioactive for at least 25 years after being shut down.

"This plant was designed in 1960," said Becker of Mothers for Peace. "How many of us would want to drive cars designed in 1960?"

Environmentally friendly

Rather than pumping more money into Diablo Canyon, she said, California should construct environmentally friendly plants to address the state's energy needs.

A 1,054-megawatt gas-fired plant now being constructed by Southern California Edison in San Bernardino County is budgeted at about $650 million.

To replace Diablo Canyon, therefore, two such plants would need to be built at a cost of nearly $1.3 billion.

New plants last longer

According to Becker, they'd be worth every penny.

"You'd have brand new power plants that last decades longer than Diablo Canyon, and you wouldn't be producing radioactive waste on the earthquake- prone coast of California," she said. "That's the best use of our money."

Got an opinion? Let state regulators know how you feel about this issue by sending an e-mail to public.advisor@cpuc.ca.gov.