The company proposing a giant Battery Energy Storage System or BESS Project in Morro Bay has decided to step over the City and take its project to the State for approval, it says after the City issued a new timeline for its review that stretched out the project schedule too far.
‘Dear Morro’ Letter
Vistra Energy broke up with the City in a “Dear John-like” letter dated Oct. 28 notifying the Mayor and City Council of its decision to ask the California Energy Commission (CEC) for a permit under provisions of a 2022 law.
“Vistra, today, informed the City of Morro Bay of our decision to pause our application through the City and our intention of pursuing the permitting path available through the State of California via Assembly Bill 205,” reads a news release from Meranda Cohn, a spokeswoman for Vistra. “This decision was primarily made because the City, within the past several weeks, published timelines and consideration processes that would add at least 18-months of municipal review prior to any preliminary vote.”
This made the path forward through the City’s planning maze too uncertain for the Houston-based energy company’s liking.
“Given this extension of municipal consideration,” Vistra’s letter, written by Claudia J. Morrow the Senior Vice President, Development Vistra Corp., said, “the State’s Opt-in Certification process will provide a more defined pathway for consideration.
“The uncertainty and ongoing delays in obtaining a decision regarding a permit to construct were impacting the planning for the project, including long-lead time items and matters involving transmission.”
AB 205 includes strict deadlines within the law for State agencies to review, comment and vote on a project; and much quicker than usual for this State’s plethora of governing agencies.
City Reacts
City Manager Yvonne Kimball was on vacation and so Estero Bay News inquired of the mayor and planning director, who said they were disappointed but not so much surprised.
“I am not surprised that Vistra has pulled its permit to go via CEC,” Mayor Carla Wixom told EBN. “I am disappointed that they have chosen this path rather than continue with the City process. Staff will engage with the state level processes. We are committed to transparency and will keep residents informed about any developments regarding this project.”
Community Development Director, Airlin Singewald, whose department has been overseeing the project’s planning and environmental review, said, “The City is disappointed to learn of Vistra’s intent to bypass local zoning and instead apply to the State for approval under AB 205.”
They plan to keep on top of the project, no matter who’s doing the review. “We plan to fully engage in the AB 205 process,” Singewald said, “to ensure the best possible outcome for the Morro Bay community in terms of economic, fiscal, safety, and environmental impacts of the project, should it be approved by the State.”
Vistra’s move to jump to the CEC doesn’t mean local interests will be cut out of it even though the big decisions will be made by State Agencies (see related story on page 2).
“We will also advocate for maximum local public involvement in State decision making on the project,” Singewald said. “We just received this letter and will be consulting with our legal team on next steps.”
Big Companies, Big Plans
Morro Bay is no stranger to big companies trying to do big projects at that power plant site. Duke Energy tried for seven years to replace the old gas plant with a new more efficient combined cycle gas plant, and while the CEC actually approved the project, the State water board changed the rules mid-way and Duke never did get a permit, eventually selling the property. It changed hands a couple of times and now is owned by Vistra.
Vistra in 2020 proposed a 600-megawatt BESS for a 24-acre site on the 107-acre power plant property. That’s the site of an old tank farm that used to hold fuel — fuel oil, diesel, kerosene — that was burned at the plant from its inception in the mid-1950s until about 1996, when the plant switched full time to burning natural gas. The oil tanks were removed around 2011 and the plant itself was permanently shutdown in 2014.
The BESS Project includes a provision to tear down the old power plant and stacks, paid for by Vistra. There’s also a Power Plant Master Plan being worked on now by the City. That plan covers the power building, admin building, seawater intake building, and the stacks but not the BESS site on the tank farm.
Two Main Options
The project design has two basic options. It could either be done in three, 90,000 square foot, 4-story buildings housing tens of thousands of battery packs each, or in hundreds of small buildings with just a few batteries each. Those are two of the things being weighed through the EIR that will now be decided by the State.
Thanks From Vistra
Vistra said it appreciated all the work the City and its consultants have put into the project. It listed three milestones the project review has accomplished: completion of a Draft Environmental Impact Report (DEIR); an analysis of the consequences to the public concerning health and safety (in case of fire); and, an economic and financial analysis, which Vistra’s consultant said would bring a “windfall” to the City of “$24.2 million in the first 10 years,” and “providing financial resources for municipal leaders to invest in initiatives and services to improve the community and quality of life for residents and visitors,” reads Morrow’s letter.
Opt-Out, Opt-In
Instead Vistra said it would make application to the CEC, for so-called “Opt-In Certification,” under AB 205 and expects that application to be submitted before the end of the year.
That would be when the City gets cut out of it.
But there could be an issue with its bill to the City, as Vistra has been funding an account with hundreds of thousands of dollars to pay for work on the EIR and the Master Plan but may be in arrears.
Asked if rumors were true that Vistra had declined to pay the last bill the City sent them, Singewald replied, “The City is performing a financial analysis of the trust account and will provide this information when it’s available.”
The EIR Consultant, Rincon, has had its contract amended six times since being hired in March 2021 and now totals over $600,000, which is supposed to be paid entirely by Vistra.
A Daft Draft
Rincon’s workload erupted like a volcano after the DEIR was released earlier this year. The City received 213 written comment letters totaling over 1,000 pages in response to the Draft EIR, according to a City report.
The CEC can probably expect a similar response when it asks for comments, as well as the Coastal Commission once its role in this political drama goes before the public. And AB 205 calls for public hearings to be held close to the project site.
The Duke project produced more than 150,000 pages of documents, comments, studies, more comments and reports with even more comments to consider; and the CEC held numerous local meetings; however, the decisions were made in Sacramento.
Who’s in Charge Now?
Switching directions and asking the State to intervene will mean the project review — both environmental and statutory — will be handled by the CEC and the Coastal Commission, which is one of a handful of State agencies that were not side-stepped by AB 205.
It could be expected that Vistra would seek to pick up with the EIR where the City left it. Or the CEC could tell the company to start over.
The CEC permit will supersede all local laws and regulations, but the CEC is still supposed to make sure a project meets those laws in the first place. Or it can deem it infeasible to satisfy the locals and approve it anyway.
Only the Coastal Commission can issue Coastal Development Permits (CDPs), under the California Coastal Act. That’s where the City’s planning efforts were also taking the project, as the City is authorized to issue CDPs, however, the City’s permits are appealable to the Coastal Commission anyway, so that road would have eventually led to the commission too.
There is near zero chance the BESS Project would not have been appealed after the City Council’s vote — whether yea or nay to the project.
Psych!
Though it’s sidestepping the City, Vistra said it still looks forward to working with the City.
“Vistra recognizes that the plant property is adjacent to the most precious and defining aspect of Morro Bay, your coastline and harbor,” the letter said. “We welcome the opportunity the Opt-in Certification process provides to continue our partnership with you and numerous other local and state leaders.
“Together, we will ensure that the plan to deploy zero-carbon energy technologies at the former fossil-fuel site will be done in a manner that is good for the environment.”
Under AB 205, the CEC will have to take into consideration whether Vistra has reached agreements with various stakeholder groups, like Native American Tribes, workforce development agencies and the city government, among others.
So the City cutting a sweetheart deal for tax monies is still possible, though it’s bargaining position would seem somewhat diminished.
Reusing a Relic
Vistra proposed the BESS as a way to reuse the old, industrialized power plant property and help the State address its ambitious renewable energy goals.
“The Morro Bay Power Plant,” Vistra said, “provides a unique opportunity to use a small portion of a retired fossil fuel power plant site and for Vistra to invest $900 million to construct a new state-of-the-art energy storage facility to capture and better utilize excess renewable solar electricity.”
And, “It is our experience that reusing a power plant site for renewable and zero-carbon energy is the most sustainable and environmentally conscious decision to be made to meet the growing electricity demand. Building a new greenfield facility requires disturbing land and building transmission lines and substations, which are expensive and resource-intensive, including time, land, labor, and more.”
Vistra had thought to take advantage of an unused Pacific Gas & Electric substation that used to transmit the energy from the old power plant, for a ready connection to the power grid, and the fact that the property is a so-called “Brown Site” already mucked up by industrial use.
Brown Site
A State Department of Toxic Substances Control investigation of the property uncovered some minor contamination in a couple of areas that would require cleanup before the property could be redeveloped for anything other than industrial uses.
The DTSC did not investigate the soils underneath the power building or the smokestacks and left its report open ended in that area.
Vistra’s project with the City included a promise to remove the old power plant and stacks, as part of the BESS project. It’s unclear at this time whether Vistra will include plant demo with its new application before the CEC, as it cut out the City’s jurisdiction with the move under AB 205.
Coastal Commission is Key
Vistra, which is based in Houston, Texas, may get favorable responses from the CEC, but it might not find so warm a welcome from the Coastal Commission.
In a letter commenting on the DEIR sent in early August, Coastal Commission staff pointed out numerous problems with the BESS project, including coastal hazards, the same set of hypothetical scenarios that forced the City to move its new sewer treatment plant inland, and away from the coast.
Coastal hazards mentioned by the Commission’s letter, include flooding from Morro Creek, tsunami run-up zones, sea level rise and more.
It also cautioned that protected dune scrub habitat has crept back into the old tank farm site and could now be considered “environmentally sensitive habitat,” throwing up one more issue for the project to mitigate.
Also, the Commission noted that a battery facility is not a “coastal dependent use” and therefore really shouldn’t be sited in the coastal zone, something the City recognized right off when it was proposed.
Normally, such projects must provide greater than normal public benefits to qualify, but AB 205 is unchartered territory.
The City was seeking to cut a development deal with Vistra for revenues from the BESS. To what degree the City can still do this is now less clear, however, the CEC process must take into account benefits to the local agency that it took permitting away from.
If a project doesn’t “conform” the CEC can still approve it by finding that “the project is required for public convenience and necessity,” and there’s no other way to do it.
Implications
The implications for this move by Vistra are huge, not just for Morro Bay but the entire State of California. Such battery facilities are being proposed in numerous locations and of varying sizes. But Morro Bay is different than other such projects, as this BESS is located on the Coast and in the middle of town.
Battery facilities continue to catch fire and disrupt the communities around them. Vistra itself has had emergencies with its 300 MW BESS at the Moss Landing Power Plant, which while not a fire per se, still forced the evacuation of Moss Landing Harbor and shut the plant down for months.
And at least one Southern California Agency is proposing regulations on the siting of BESS facilities in residential areas.
Tinkering Again
Morro Bay once again is leading the way with regards to the State’s experiments tinkering with the energy sector. The State’s Deregulation efforts of the late 1990s led PG&E to sell four of its old gas plants — Morro Bay, Moss Landing, Oakland and Pittsburgh — to Duke Energy North America (DENA), an LLC under the Duke Energy umbrella, and based in North Carolina. DENA almost immediately sought to replace the old plants with new cleaner burning and more efficient combined-cycle power plants.
DENA’s project to replace the Morro Bay plant, at a cost of $800 million, was the first one proposed after deregulation. Duke also sought to replace Moss Landing and was actually successful with that project, getting it permitted, built and online in about three years. But the Morro Bay project, after over seven years of study and review, never did get a permit.
Duke ultimately abandoned it after the State Water Quality Control Board prohibited the use of seawater for cooling steam.
Duke expended an estimated $35 million on a permitting process through the CEC that ultimately failed after some 7-years of work. Still Vistra believes going the CEC route will be quicker than the 18-month, “Phased Approach” the City was going to take.
Measure A-24
And while Vistra didn’t specifically mention Measure A-24, which was contested at the Nov. 5 Election, that citizen’s initiative must surely have played a part.
Meas. A-24 would have locked in the current zoning on all of the City controlled properties from Beach Street out to Morro Rock and including the power plant property.
In the new General Plan/Local Coastal Program (GP/LCP) update, the City changed the zoning on the power plant to “Commercial/Visitor-serving,” and in order for the City Council to approve a BESS Project, the zoning has to be changed back to industrial. The plan was to change the zoning along with the approval of the Final EIR and issuing the CDP. With the CEC now in charge, the State will still have to change the zoning, which the Coastal Commission said must be done with a full-blown LCP Amendment.
Meas. A-24 would force the City to ask voters to approve any zoning changes along that stretch of the waterfront. This would have been on top of Measure D, an older initiative from the early 1980s that reserved much of the same area as A-24 for commercial fishing and sport fishing uses.
The town has been locked in a pitched battle over A-24, with proponents arguing it was the only way citizens’ voices could be heard — above the elected City Council — and opponents arguing — correctly it turns out — that it would push Vistra’s project into the AB 205 work-around, which it now has done, some two weeks before the election.
So much is still to be determined with this the first-time use of AB 205. But Vistra said it would continue to be “transparent” with the project.
“We will retain this project website moving forward and provide updates and information to the community as appropriate. “ See: morrobayenergystorage.com for the project documents and to view the AB 205 letter.
