Owners of the Morro Bay Power Plant and its towering triple smokestacks—a landmark to some, a destructive eyesore to others—recently announced they are shutting the facility down in February, but there’s a good chance residents will still be talking about it for a while after.

The controversial facility has been hard on the environment and at the center of a debate over what to do with it in light of regulations adopted by the State Water Resources Control Board in 2010. The plant is near two marine sanctuaries that protect the Morro Bay Estuary and is a striking image in an otherwise serene landscape. 

The rules require power plants that withdraw and return marine water, in what’s called once-through cooling, to stop doing that. The 19 affected plants must also install equipment to reduce their impact on marine life. Once-through cooling is responsible for killing 2.6 million fish, 19 billion fish larvae and dozens of sea lions, seals, sea turtles and other creatures every year.

They must either convert to a less destructive process or shut down. The Morro Bay Power Plant is the only one among the 19 plants deemed not needed by the state.       

Josh Friedman at Cal Coast News added a new wrinkle to the ongoing plant saga when he reported this week that the State Lands Commission is investigating the city for allegedly misusing around $5 million it received from the plant since 2005. The newspaper said that $525,000 annual payments from plant owner Dynegy Energy Co. made their way to the city’s general fund although the city’s own website clearly states, “Under the Tidelands Grant Statute, all revenues received from the Tidelands must be used for operation and improvement of the tidelands.”

Sheri Pemberton, commission chief of external affairs, told Cal Coast News that her agency had been looking into the matter since 2011.

The tidelands bordering Morro Bay were granted by the Legislature to San Luis Obispo County in 1947. The city became owner in 1964 when it incorporated. The grant gives the city leeway in contracting with private companies that use the tidelands, and it receives about $1.5 million a year in compensation.

The money is meant to flow into the Harbor Operating Fund, according to Cal Coast News, which is responsible for maintenance and improvement of the tidelands. But beginning in fiscal year 2005-06, the annual payment for the plant owner wound up in the city’s general fund instead.

The shutdown of the antiquated natural-gas-fired plant was not totally unexpected. The Houston-based owner is mired in bankruptcy and its contract with the state was cancelled in May 2012. It has been selling electricity in the short-term “day-ahead” market, while fending off environmentalists and state regulators.

–Ken Broder

To Learn More:

State Commission Investigating Morro Bay for Misuse of Funds (by Josh Friedman, Cal Coast News)

Morro Bay Power Plant Closure Means Less Revenue for City, County Agencies (by David Sneed, San Luis Obispo Tribune)

Morro Bay Power Plant Loses Contract to Sell Its Electricity (by Jack McCurdy, The Slo Coast Journal)

Morro Bay Power Plant Closing in 2014 (by Keith Carls, KCOY)

California Rules Restrict Power Plants' Marine Water Use (by Cassandra Sweet, Wall Street Journal)