The Morro Bay Power Plant: Past, Present and Future - Part 2
by Jack McCurdy
(To refresh your memory, read Part One of this three part series)
With great fanfare, Duke Energy unveiled its anxiously-awaited plan to "modernize" (as Duke called it) the just-purchased Morro Bay Power Plant in spring, 1999. Modernize was the euphemism Duke used - and was parroted by all its supporters - for its proposed new plant, which was advertised as a cleaner, smaller, more efficient, and better plant that the community would be proud of. But, right off the project itself turned out to be a letdown for just about everyone - it was not a full replacement, as most assumed it would be, but more of a "little new and a lot old."
Duke proposed to build two new generating units with two 145-foot smokestacks on a site just west of the existing plant, and removal of the two oldest units with their two 450-foot stacks, the first opened in 1955. That would have left four smokestacks - two new and two old - in place of the three 450-footers that had been on site since the early 1960s. Duke estimated the cost of the project at about $225 million to produce about 1100 megawatts (MW) of electricity, about 100 more than the old plant's generating capacity.
But the Morro Bay City Council refused to support Duke's project application to the California Energy Commission (CEC), in large part because the application had few details on impacts on public health from the partly-modernized plant's emissions and on marine life in the Morro Bay National Estuary - and on how both people and fish would be protected, to the extent possible. The CEC staff had similar objections and refused to certify the application as complete for CEC review.
There were also city concerns over how much revenue Morro Bay would receive from the new plant's operations, that the old plant would not be entirely replaced, and the lengthy time it would take to finish the proposed project. The "collateral damage" from a long construction period to public health, businesses, and tourism also loomed large.
In fact, Duke had filed the application without even discussing it with the city, according to city staff. Duke said it didn't have to - it was all up to the CEC. It was not clear what role Morro Bay or any city could play in the review process under state statutes, but a CEC spokesman was quoted in the Sun Bulletin as saying, "It's very important the city of Morro Bay support the project. The city could probably effectively stop it or get it changed greatly before it's passed."
But the city also had a hammer. Staff pointed out to Duke that the city administers state land on the beachfront just west of the plant where water drawn from the Estuary. That water is used for cooling in the plant, then is discharged - heated - through an outfall channel into Estero Bay alongside Morro Rock. Any plant owner needs to lease that public land from the city for that purpose - if the plant were to be cooled in what is called a "once-through cooling" (OTC) process, which is what the Duke project proposed to use. In effect, it was"no lease, no operating plant."
Facing those insurmountables, Duke withdrew the application before the end of 1999 and started all over, which took a year.
Duke and the City Council then negotiated and signed a memorandum of understanding (MOU) in 2000, which locked in city support. In return it guaranteed the city a minimum of $2 million a year when plant operations started, the first phase being forecast in 2003. This turned out to be unrealistically optimistic, at best, because the CEC review didn't end until 2004. Regardless, $2 million in revenue from the power plant was an eye-opener, considering the city's general fund totaled only $6.6 million in 1998-99. Plus the city had received very little from the plant operations over the years - a lump sum of only $500 (cq) plus the Vets Hall from PG&E when it opened the plant in 1955, according to city staff. And that was all for about 45 years.
However, when Duke bought the plant, and as a new owner, under state law, it began having to pay the city a fee based on the amount of natural gas used to operate the plant. The city's revenue from the fee began to skyrocket in 1999-2000 when the so-called shortage of electricity hit California and all plants were supposedly operating at or near maximum capacity. But instead of a real shortage, it turned out to be market manipulated by the likes of Enron and other merchant power companies, including, it turned out, Duke. According to city staff, that gas tax revenue from Duke to the city jumped to $800,000 a year and reached as high as $4 million a year in 2002.
Under the MOU, in return for the $2 million a year guarantee, the city ceded virtually all control over the project to the state agencies, despite the pleas of CAPE and others that the city should at least try to have a strong hand in determining the conditions placed on the project for the good of the community, even though at that point it was still uncertain what influence the city might exert in the review process. The MOU stated: "Duke and the City acknowledge that issues not specifically listed as City Issues such as air and water quality will be addressed by other regulatory agencies through the CEC review process," although the city did "retain the right to urge full consideration by the CEC and other agencies of any new information regarding impacts. . ." CAPE felt strongly that the city was abdicating its responsibility and foregoing an opportunity to represent the interests of residents in extremely important areas - air and water (of the Estuary) quality.
As it turned out, the CEC did defer to the city to a significant degree during the project review, although that might have been because the city supported Duke so solidly.
The City-Duke agreement called for the old plant to be closed and the new plant to begin operating, both in concurrent phases beginning in 2003, 2010, and 2013. The entire existing plant and the oil tanks on the site were to be removed by 2013, if the project was on schedule, but no later than 2015. The MOU required the new plant to be "substantially smaller . . . located further from the city's waterfront and . . . uses state of the art technology."
Duke was required under the MOU to "ensure that any potentially significant adverse environmental impacts of the (new plant) are fully addressed and any significant adverse impacts which are determined to exist are mitigated."
CAPE and others urged the City Council to require actual reduction of any significant adverse impacts to insignificant levels - as is typically required by state and federal environmental and air quality standards - instead of just vaguely "addressing" such impacts. The Council also was asked to drop required mitigation, which only suggests compensating for impacts, not reducing or eliminating them. How is a significant air quality adverse impacts mitigated, if it is not reduced to insignificance, CAPE asked?
Duke also gave the city at least $460,000 to offset city costs of participating in the review, which could be used to pay for legal representation. Such funding is common from developers doing business with the city. Reimbursing taxpayers for costs to the city for participation in the review seems only fair. But what did it do to the city's independence in evaluating possibly the most significant development in city history on behalf of residents? CAPE and others wondered.
At that point, with no Duke project application on the table - and, therefore, no way to know what a new plant might involve - and with the city having approved broad conditions for support for what Duke promised would be forthcoming soon in the form of a second application to the CEC, some came up with the idea of giving Morro Bay voters an opportunity to pass judgment at the ballot box on whatever emerged from all this uncertainty. So a political action committee named Morro Bay Neighbors (former Morro Bay mayor and legendary community leader Joe Giannini was a member) was formed separately from CAPE. Initiative petitions were signed by voters and Measure Q, as it was designated, was qualified for the November 2000 ballot.
The timing seemed important because it appeared possible, even likely, that the CEC might act on a new Duke application as early as the following year. That could mean follow-up action by the Regional Water Quality Control Board shortly after that, in which case, the vote requirement needed to be in place if it were to come into play before ground was broken on a new plant.
Measure Q asked voters: "Shall an ordinance be enacted that no amendment to the Morro Bay General Land Use Element or to the Morro Bay Coastal Land Use Plan that would authorize or otherwise sanction the development or redevelopment or replacement of any electrical-generating facility that exports electricity outside the city limits of the City of Morro Bay shall be effective until approved by a majority vote of those voting in an election in the city of Morro Bay."
The measure was keyed to a provision of the city's Land Use Plan, which states that when plans "to expand or modify 'the plant' would be proposed they will require an amendment to the Local Coastal Plan." The basic idea was that once it became clear what a new plant would consist of in concrete terms, voters could then decide if they wanted it in their community - not "any plant," but the plant that Duke proposed ultimately.
The City Council then came forth with its own competing ballot initiative. This was not a binding ordinance, but an advisory measure that asked, "Shall the City Council support a single-phase project for the replacement and demolition of the existing Morro Bay Power plant (estimated to be completed by 2007) if the project complies with all regulatory laws, ordinances, regulations and standards?" It was designated Measure P and qualified for the same November, 2000, ballot.
Obviously, Measure Q would have been controlling because it was an ordinance. But Measure P provided a seemingly-benign option that bestowed blind faith in those in authority who would determine whether compliance with all laws, ordinances, and regulations and standards (often called LORS) were met. And who are those in authority? It was the CEC, the Regional Water Quality Control Board, the California Coastal Commission, the California Department of Fish and Game, and the National Marine Fisheries Service. As it turned out, they were sharply split on whether the proposed Duke plant would, in fact, comply with the LORS. So where would that have left the question of compliance?
Duke had poured money into the community since unveiling its plant replacement plan. " . . . Duke has been throwing money out to the masses, while asking the citizenry to trust it to do the right thing," reporter Neil Farrell wrote in the Sun Bulletin. In response to a CAPE information request through the CEC, Duke admitted to spending $80,000 to gain the support of residents, community groups, and civic associations, such as the Chamber of Commerce, the county Office of Education, and the Morro Bay Museum of Natural History.
By our estimates, Duke spent at least another $20,000 on media advertising alone during the election campaign - Morro Bay Neighbors spent a few thousand. In addition, Duke conducted open houses at the plant, neighborhood "chats" and "Duke chats." A pro-Duke flier called Morro Bay Crossroads was widely circulated, but it contained no names or addresses of the producers. Sponsors of ballot measures are required to file spending statements with the city clerk, but oddly none is on file in Morro Bay City Hall.
The message promoting Measure P was based on the new information about the plant in the second application that Duke filed with the CEC a few weeks before the election. The ink was barely dry when The Tribune endorsed the project - long before the regulatory review of its outlines could begin. The newspaper also endorsed Measure P, echoing the Duke claims about the project. Duke's ads, fliers, and speaking points consisted of "Promises Made to the Community" in the application that, actually, few had time to read, such as "improved air quality, reduced seawater usage, and a guaranteed $2 million per year to Morro Bay." In the months and years that followed, the improved air quality claim was called into serious question and less water use was refuted by CEC staff and CAPE.
During the election campaign, Morro Bay Neighbors did circulate flyers, pointing out that the plant would release 1,500 tons of pollution a year and withdraw 156 billion (cq) gallons of water each year from the Estuary for the next 50 years. But there was no information available yet for challenging Duke's claims that this would be better than the existing plant.
Duke won the support of local civic organizations, including the Chamber of Commerce, as well as the endorsement of Measure P by then state Sen. Jack O'Connell and then Assembly member Abel Maldonado, who represented the area, including Morro Bay. In their last shot, Duke supporters paraded around town and near the polling place waving posters with wording obviously trying to confuse P with Q and Q with P.
In fact, Duke held all the cards, not only because few even knew about the new application, but also because the state agencies had yet to analyze its application and claims about the proposed new plant, nearly all of which turned out to be untrue. One Duke ad claimed there was not a "no plant" alternative, only a "clean plant or a cleaner plant." With Duke's application as the only source of information to debate, no wonder Duke's unchallenged "facts" turned out to be so convincing. And no wonder Duke won.
Measure P passed by a margin of 64% yes to 36% no. Measure Q lost 46%-64%. The turnout was 71%.
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