Power Plant to Close: What Next?

by Jack McCurdy

With the Morro Bay Power Plant scheduled to close next February, the City of Morro Bay is faced with some momentous decisions: what should be done with the beautiful 107-acre site on the north shore of the Morro Bay National Estuary that the plant has occupied for 58 years, and what role should the community play in making that decision for its own best interests, both aesthetically and economically, that could be significant for the future health and welfare of the city as it approaches its 50th birthday.

One of the most significant events in Morro Bay's 49-year city history lies on the horizon with the planned closure of the 58-year-old Morro Bay Power Plant. The plant owner, Dynegy, says the closure will come sometime next February. And now the question is: what's next?

That expansive question entails a whole range of answers — possible answers — but the main one likely is what role will the city of Morro Bay play in determining the future of the worn out plant? It is the only one of 19 coastal power plants in the state that the California  Independent System Operator (CAISO) has designated as "not needed" to ensure (electric) grid reliability in California, that is all the electricity the state needs. The  plant has operated with only two of its four generators since about 2003 and has barely been able to sell the little electricity it does generate for more than a year.

Even with the recent closure of the San Onofre Nuclear Generating Station (SONGS), the state has an abundance of electricity, due in large part to the explosion of solar energy.

Within the past year, Dynegy gave up its back-shelf plan to "upgrade" the present plant, in large part because the California Water Resources Control board in 2011 adopted new regulations requiring all coastal plants to phase out use of estuary, bay and ocean water (called once-through cooling — OTC) to cool their generators by certain various target dates. The closure plan was motivated by the killing of aquatic life in water swept into power plants, jeopardizing the health of water bodies such as the Morro Bay National Estuary and possibly jeopardizing the economy and property values in the community.

The Morro Bay plant is required to stop using water from the Morro Bay Estuary by 2015 and was ordered to state its plans to either stop using the water or identify what alternative in might pursue, such as use of recycled (probably fresh) water for cooling generators to keep the outdated plant operating. That type of cooling would be very expensive, as Dynegy has acknowledged and wouldn't get by other hurdles, such as stricter federal air quality controls.

But Dynegy failed to provide adequate plans to the water board about how it hopes to meet the 2015 deadline, leaving the plant's future up in the air.

Technically, the water board regulations would probably require Dynegy to stop using Estuary water by 2015, which would end operations of the plant with no means to cool its generators. But Dynegy last year sued the water board to overturn the OTC regulations. Court hearings on the suit have been postponed numerous times and it has yet to be resolved.

So the water board might be reluctant to require Dynegy to comply with its OTC regulations with the lawsuit hanging over the heads of its board and staff.

Meanwhile, Southern California Edison last year cancelled its long-term contract with Dynegy for purchase of electricity from the plant, leaving it with the need to find very short-term — even day-to-day — sales.

With Dynegy immersed in financial troubles for the past several years, closing the unprofitable plant probably may have seemed to be an attractive alternative.

Among the options facing the city of Morro Bay and its Council about what to do when the plant closes are:

        1. Hold a workshop to seek input from residents.

        2.  Approve the formation of a citizens committee to study alternative uses of the plant site, along the lines of the 2007 N.E.W. Futures Group review.

        3. Request appropriate staff members to study the issue and prepare recommendations for the Council.

        4. Confer with the California Coastal Commission to determine if it now has jurisdiction over the use of the site. It did not during the California Energy Commission's review (2000-2004) of Duke's application for a license to build a new, larger and more environmentally-destructive plant. It was excluded by the Energy Commission, apparently legally. Duke sold the Morro Bay Power Plant in 2005 after the Energy Commission approved the plan for a new plant but the Regional Water Quality Control Board had not reviewed or issued its decision on the Duke project. But now that there are no concrete plans for developing the site with energy-producing facilities, it may be that the Coastal Commission has regained prime jurisdiction, and the Commission could well require visitor-serving facilities on the site once the plant is torn down. The Council might be well advised to work with the Coastal Commission staff to determine what options are available to the city in the near future with regard to use of the plant site.

        5. Confer with the Energy Commission and CAISO to determine possible uses of the plant site to meet state energy needs, although it seems unlikely that state agencies would support any new power plants or that any companies would be interested in developing a new plant, given the costs and stronger environmental controls, even if it were legally possible to do so on waterfront property.

        6. Submit an initiative to Morro Bay voters that would rezone the power plant property, eliminating industrial use and placing top priority on uses that would attract visitors to Morro Bay, generate city revenue and make residents proud of their beautiful estuarine hillside — for a change.

        7. Discuss with Dynegy what its plans are for the plant site, if any.

City Council member Christine Johnson said she would favor waiting until next February to determine if Dynegy closes the plant before taking any steps toward developing city plans to pursue a course or courses that would be best for the city. "We need to think about what the community would want," she said. "Then get feedback. But we should let the process unfold first."

All members of the Council were asked for their views on what the city should do in response to closure of the plant and were provided with possible courses of action listed from 1 through 6 above. But Johnson was the only one to respond.

"Right now, we are looking at alternatives but have made no decision," Katy Sullivan, Dynegy's public relations director, said. "We are committed to keeping the city and community involved in the future of the plant."