Future of Power Plant Faces City

by Jack McCurdy

Summary: The Morro Bay City Council is ready to tackle initial planning of the Morro Bay Power Plant's future by starting the process of updating the city's Local Coastal Program, which governs use of the plant site. The update process can be complex and time-consuming, but eventually it will open the door to the best possible use of the 107-acre power plant site after more than 25 years of failure to update the document that controls how that beautiful 107 acres on the north shore of the Morro Bay National Estuary is used.

The first step in figuring out what lies ahead for the now-retired Morro Bay Power Plant is scheduled to face the City Council next week on Tuesday, April 8, when a far-reaching review and update of the city's Local Coastal Program, which governs use of the plant site and other coastal sections of the city, is planned for discussion and possible action for investigation. The crux of that item is expected to be an important city staff report presented at that meeting, outlining the options facing the Council.

The update can be complex and is expected to be a lengthy process. The Local Coastal Program has reportedly not been revised for more than 25 years, and now that the plant is defunct, the Council majority believes it is badly needed in order to guide the future of the 107-acre plant site, which has been described in state documents as one of the most attractive pieces of coastal property in California.

At the Council's February 25 meeting, Mayor Jamie Irons "requested development of a program to update our GP/LCP (General Plan and Local Coastal Program) to include discussion of the $250,000 grant obtained by the city and how it applies to the update; how we can use the money, timelines, sending out for a RFP (request for proposal) and have that program developed for us," minutes of the meeting said. The Council vote to support such an update was unanimous.

The key to the Local Coastal Program (LCP) update is almost certain to be whether some other industrial use, virtually assured not to another be power plant, might be allowed. For example, a wave energy project offshore from the plant site that Dynegy has announced it is exploring. The energy from that project would likely be transmitted to and across the plant site and the city for distribution elsewhere.

The huge alternative to some industrial use is "visitor-serving" uses aimed at making Morro Bay more attractive to tourism, as well as to residents, and eliminating the documented dangers of the present plant (when it was operating) to public health and sea life in the Morro Bay National Estuary, from which water was extracted to cool the plant's generators.

Non-industrial uses of the plant site were reviewed in 2006-7 by a citizens committee, called the Morro Bay North Embarcadero Waterfront (N.E.W.) Futures Group (See: N.E.W. Futures Report). The Council-appointed committee looked at uses like "community and visitor serving, such as the numerous natural and cultural museums ... and retail residential housing" with "specific qualitative and quantitative goals for space based on extensive market studies and cost analysis." The present Council also is expected to consider hiring a consultant to develop a plan for exploring various alternatives for the plant site.

Ken Haggard, a member of the N.E.W. Futures Committee in 2006, said he feels the city and its citizens have a “gold mine” in the power plant. "It is a 'gold mine' once we realize that a traditional fossil fuel power plant here is not an economically- and technically-appropriate use in this period of history," he was quoted in the Committee report as saying.

The city recently received a $250,000 grant from the state Ocean Protection Council to develop a plan for investigating alternative uses of the plant site, and the California Coastal Commission staff is assisting the city in that pursuit. The Council is planning to appoint a citizens committee to participate in the GP/LCP review.

The city and Dynegy, the owner of the plant site, reportedly have begun negotiations on a related matter: the city would allow Dynegy to postpone payment of $525,000 it owes the city from use of the outfall lease where the plant has been discharging used water next to Morro Rock for many years. The city in return would obtain some properties on the plant site, including Lila Keiser Park, Fisherman’s Gear Storage Area, Harbor and Coast Guard Storage Yard, and other property on the northern end of Dynegy’s property. Payment of the $525,000 has been delayed until next May 16, pending the outcome of the Dynegy-city negotiations. It was due to be paid in January.

If and when Dynegy is ready to dispose of the plant site, it is not clear how the city could obtain or purchase it. The cost could run in the many millions. One source of such funds could be the Coastal Conservancy, which has been known to provide funds for "urban waterfront renewal," but its current capacity in that regard is unclear. At the end of 15 years after the plant's closure, the city would apparently be able to obtain the site for $1 under past contracts between plant owners (PG&E, Duke and Dynegy, among others) and the city. The cost of removing the power plant structure is an unknown.

In November, 2013, Dynegy filed a notice with the California Independent System Operator (Cal-ISO) initiating the retirement process for the Morro Bay Power Plant. In February 2014, Cal- ISO accepted the plant retirement. The retirement process will continue with an estimated final, official closure next June.

Irons said, "Moving forward, Morro Bay must tackle the long-neglected responsibility of updating our city’s General Plan and Local Coastal Program. These are vital planning documents for Morro Bay and provide the 'vision' we have for Morro Bay’s future. Written in the 1980s, both documents are sorely in need of updating. Without updated planning documents, Morro Bay will continually struggle to efficiently and effectively develop beneficial projects, including both community projects and projects that encourage private enterprise and job creation. Past city councils attempted to update the plans, but did not follow through on Coastal Commission recommended revisions. In the end, city resources and time were wasted, thousands of dollars were spent and no updates were made. I have pledged to focus on updating our General Plan/Local Coastal Program, a goal set by this Council at the beginning of 2013. That’s why I’m excited about the city being awarded a $250,000 grant from the Ocean Protection Council to fund...updating studies."