Port, ex-operator reach deal to demolish South Bay Power Plant

October 27, 2011

By Wendy Fry

Staff Writer

October 27, 2011

— The Port of San Diego and the former operator of the South Bay Power Plant reached an agreement Tuesday for a two-step demolition process to remove the 51-year-old plant after a series of closed-session meetings that began in February.

Executives from Houston-based Dynegy Inc. sent an Oct. 25 letter to port officials outlining and clarifying details of the agreement to make way for long-delayed redevelopment of the bayfront.

The confidential settlement was released Wednesday, and it drew questions about whether the port gave away too much with the deal.

Dynegy plans to apply for a demolition permit from the California Coastal Commission in the next 15 days, a Dynegy spokeswoman said.

According to the letter, the inactive plant will be demolished in two phases with a timeline stretching through the end of 2014. The first phase will include tearing down the colossal aboveground structure by July 2013. Removal of some of the pipes and foundation underneath will follow.

Funding for the demolition will first tap a trust account managed by the port that now amounts to $22 million. The state money was set aside in 1999 and has collected interest over time.

“Any costs above and beyond that related to work for the Coastal Commission permits — and we anticipate there will be additional costs — will be the responsibility of Dynegy,” said Katy Sullivan, a spokeswoman for the company.

Dynegy Inc. is on brink of bankruptcy as one of its subsidiaries, Dynegy Holdings LLC, has about $3.5 billion in debt, Sullivan confirmed.

Residents of Chula Vista have long awaited removal of the 175-foot-tall steel structure. The state’s electricity grid operator agreed in October 2010 to allow the decommissioning of the water-cooled power plant that operated on the South Bay shoreline for five decades. 

“Dismantling and demolishing the South Bay Power Plant is a critical step in our plans for the Chula Vista waterfront, which is one of the prime pieces of coastal real estate in all of California,” said Scott Peters, chairman of the Board of Port Commissioners.

The port agreed to at least a dozen conditions to expedite the process, including allowing jetties to remain on site; extending the deadline for the company to prove that certain contamination is outside the scope of its obligation, and reimbursing the company up to $100,000 for any extra costs incurred because of the two-tiered approach to the project.

Steve Peace, a former state senator who has long been involved in South Bay Power Plant discussions, said Dynegy’s deadline extension could shift more of the cleanup burden to the port by allowing SDG&E’s obligations to expire in 2014.

He also objected to the parties’ decision to work on the agreement in closed sessions.

“We have worked very hard and diligently to reach this agreement over the last 10 months,” said Chula Vista Port Commissioner Ann Moore.

The most recent closed-session agenda last week listed the discussions as about “real property negotiations.” However, when asked about the scope of the discussions, a port spokeswoman said the meetings were about “the strategy of Dynegy’s obligations under its agreements with the Port District.”




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