Synopsis: The power plant's future became much more uncertain with the announcement on May 30 that Dynegy, its owner, had its contract for sale of the plant's electricity to a public utility suddenly cancelled, leaving the old plant with no long-term means for producing income for Dynegy, which is mired in bankruptcy.
The 57-year-old Morro Bay Power Plant had its contract for sale of electricity generated by the plant cancelled a few weeks ago, which, along with other new developments, appear to foretell the end of the destructive plant with its three looming 450-foot high smokestacks that have marred the beautiful ambience of Morro Bay on the north shore of the Morro Bay National Estuary for over a half century.
The fact that the Morro Bay Power Plant is the only one of California's 19 coastal plants that has been designated by state agencies as being "not needed" to meet the electrical needs of the state's population may be the nail in the plant's coffin as far as winning any long-term contracts to keep selling its electricity.
Closure of the old plant would bring to an end to its destruction of fish and crab larvae carried into the plant with estuary water used for cooling its generators and an end to release of emissions containing particulate matter that threatens the lives of residents and visitors who breathe the pollutant. (See: Particle Pollution - Fast Facts) The plant has been operating very minimally for the past five years or more, so little particulate matter has been released into the air over Morro Bay. Two of its four generating units were mothballed in about 2003 and the other two remain operational.
MB Power Plant Letting Off Some Early Morning Steam - May 30.
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The closure will provide an historic opportunity for the Morro Bay community to develop the 107-acre plant site with something they can be proud of and would benefit Morro Bay, such as a maritime museum, a boat facility, a hotel or motel, solar or wind power facilities, open space and hiking trails or other uses — all of which have been suggested by residents over the years.
Development of a new power plant appears to be all but ruled out by the restrictions for such projects by the California Coastal Commission, the California Energy Commission, and other agencies, such as the U.S. Environmental Protection Agency, which together now require environmental priorities for such coastal territories and oppose polluting plants and are pursuing enterprises that produce renewable energy. In a filing with the State Water Resources Control Board, Dynegy has even expressed pessimism about building another power-generating facility because of expanding EPA restrictions on air emissions.
Under a two-year-old state water board policy, the plant must end its practice of withdrawing water from the estuary or the ocean (called once-through-cooling or OTC) by 2015, and Dynegy has strongly indicated it does not plan to convert the plant's cooling function to air cooling or recycled water cooling, which are acceptable alternatives to OTC, because of the cost for an aging plant whose days are numbered anyway. Dynegy has not stated clearly what it plans to do with the plant by 2015, despite policy requirements to do so. Dynegy has even filed suit against the State Water Resources Control Board to overturn the policy. No hearing on the suit has been held yet.
The loss of the electricity sale contract for the plant by Dynegy last month was coupled with these events:
1. The plant manager, Steve Goschke, was reported to have told Larry Allen, the executive officer of the San Luis Obispo County Air Pollution Control District (APCD), that Dynegy was planning to close the Morro Bay plant next year. As a consequence, the APCD board on May 23 approved a fiscal plan that called for preparation for loss of fees from the plant because, the plan said, "we are facing the probable closure of the Morro Bay Power Plant in the fall of 2013."
That report of the probable closure of the plant was widely circulated in the local media. But Allen later clarified that Goschke, the plant manager, had not told him the plant would close next year but that the plant's contract for sale of electricity "only goes through 2013 and getting a new one does not look that good." Allen said he and the APCD board began to plan for the loss of fee revenue from the plant, assuming the expiration of the plant's contract would mean loss of the fees.
2. What Goschke is said to have told Allen could not be confirmed because Goschke refused to return messages seeking his comments. Dynegy also would not comment.
3. Dynegy would only say on May 30 that there is no plan to close the plant next year, but its spokesperson would not comment on the possibility that although there may be no formal plan to close the plant, there could be informal preparations to do so.
4. Allen noted that use of natural gas by gas-fired power plants in California is dropping rapidly. Many of the old plants have closed or their owners have indicated they are planning to close them. Meanwhile, the growth of renewables energy in the state continues to rise steadily (California leads the nation in producing renewable energy) and replace the reliance on gas and nuclear plants.
Then, with no forewarning, Dynegy, on May 30, issued a press release on the status of the plant, which said in part:
"Dynegy's Morro Bay power generation facility continues to provide Californians with safe, reliable and environmentally compliant electricity. Until recently, output from the facility was under contract to a local utility. That contract was cancelled in mid-May and the cancellation will likely result in a shift of earnings and cash flows between periods. Dynegy is actively seeking other commercial arrangements for the facility and has been offering the facility's output in the day-ahead market administered by the California Independent System Operator since May 19, 2012. Dynegy will continue to respond to requests for offers from California utilities seeking to procure electric capacity needed to serve their customers. While Dynegy has been successful in winning contracts through this resource adequacy process in the past, Dynegy believes that a more forward-looking, transparent, market-based solution to securing electric supply would benefit consumers, utilities and independent generators. Dynegy has no plans to retire the facility at this time, and as long as the plant is economically viable, Dynegy will continue to operate it."
Dynegy apparently was successful in selling the plant's electricity in that short-term "day-ahead market," as evidenced by the large amount of emissions coming out of the smokestacks over the past few days. The question is: how long will Dynegy continue to maintain the plant in an operational status without a long-term contract to produce any income for Dynegy, which is mired in deep and complex bankruptcy. (See: SCJ - Dynegy).
Meantime, the plant's outfall lease, which allows it to discharge estuary water used for cooling its generators, into Estero Bay at Morro Rock expires next November 30 and, without a lease, the plant cannot operate. Negotiations reportedly have been proceeding between the city — which has jurisdiction over the lease — and Dynegy to renew the lease, but the City Council has not been asked by its staff to approve a new lease — possibly because of the uncertainties surrounding the plant at this time.
