Firm Hopes to Expand Morro Bay Power Plant Despite Poor Economy

MORRO BAY —  Central Coast environmentalists hope the vagaries of California energy economics can do what they could not: slow or even halt expansion of the Morro Bay Power Plant overlooking a scenic estuary of pelicans, harbor seals and stately Morro Rock.

Weak prices for electricity, lower demand, and more power plants coming online in California have combined to cause a slowdown in plant construction across the state.

Though plant owner Duke Energy says all systems are go for expanding its aging Morro Bay facility, construction shutdowns at three out-of-state Duke units--and planned layoffs of managers directly overseeing Morro Bay’s $600-million-plus expansion--have raised eyebrows in San Luis Obispo County.

For 13 days this month, the 1,000-megawatt, natural gas-fueled plant was idle because the state power grid did not need its relatively expensive energy, according to officials at Duke.

The company wants to replace the plant with a 1,200-megawatt power station that would burn more cleanly and at lower cost. City leaders in this tourist town of 10,000 support the expansion while a grass-roots community group wants to stop it.

The project manager and others associated with the expansion will be laid off effective this week, as will the project manager for a proposed Duke plant in Avenal, inland in adjacent Kings County.

Pat Mullen, Western U.S. spokesman for the Charlotte, N.C.-based company, stressed that Duke is merely being hit by the weak economy afflicting the entire industry.

Though there have been layoffs at Duke operations across the country, he didn’t give specifics. He estimated that the California layoffs amount to just five to 10 people. He stressed that there is already a new project manager overlooking Morro Bay and Avenal.

“Our hope is by the time we get the California [plant expansion] permits, we’ll start seeing the market turn around,” Mullen said. “Right now, we are in a batten-down-the-hatches kind of mode. We’re trying to ride out the heavy weather of the current market conditions.

“We’re a 100-year-old company. We’ve learned to manage through down cycles in the past,” he explained.

Duke hopes to tear down the 45-year-old Morro Bay plant and build a unit with smaller, 145-foot stacks at the edge of the bay. The project was proposed in 1998, and had an estimated cost of $500 million.

With the price tag already $100 million more, Duke fears that it could eventually approach $800 million by the time state permits are granted and construction is complete.

Opponents of the plant in the local environmental community tend to oppose even its smaller-profile yet expanded capacity.

“The shutdown came at the conclusion of a number of months of failure by Duke to get the new plant permitted,” said Jack McCurdy, vice president of the alliance fighting the Morro Bay plant. “From a financial standpoint, we think they are in serious trouble.”

Though Duke has its vocal foes in the community, the vote on a Morro Bay initiative in the fall of 2000 showed that a majority of voters in town supported the expansion and modernization. And the city government has consistently concurred.

With the plant’s assessed valuation of $130 million, Duke is already the third-largest property owner in San Luis Obispo County. That valuation could jump to more than $700 million after a plant expansion, significantly boosting property tax income for local government.

Opponents of the plant say they are resigned to it being there in one form or another, so they have chosen to carry out the fight over the details.

One such detail will come up when a subcommittee of the California Energy Commission hears testimony in Morro Bay on Oct. 24. The focus will be Duke’s ongoing efforts to let the new plant use a saltwater cooling system, which staff regulators say would kill fish and crab larvae.

Whatever happens, Mullen said, he is confident there will still be a plant in Morro Bay.

“It just makes environmental sense to replace older power plants with cleaner, more efficient ones,” he said. “If we are not able to do that, we will still have an operating plant here.”