Dynegy reaches agreement on natural gas-fired peaking plant's dismantling

Dynegy (NYSE: DYN) and the Port of San Diego reached an agreement to dismantle the 309 MW South Bay natural gas-fired peaking plant in California.

The California Independent System Operator (Cal-ISO) in October 2010 notified Dynegy that it would rescind its decision to extend the plant as a must-run facility for the following year. Two of the plant’s four units were retired at the end of 2009 due to the expiration of must-run status for those units. The plant ceased operations on January 1, 2011 and Dynegy and the port have been going back and forth on plans to dismantle the plant.

News reports said that Dynegy said in an Oct. 25 letter that it would approach the dismantling in a two-step process that would include the removal of above-ground structures, followed by removal of subsurface structures and in-water structures to a depth of 4-feet below grade. The company must reportedly obtain demolition and development permits before it can begin the work, which is estimated to be as high as $70 million.

The Port District bought the power plant in 1999 with the express purpose of tearing it down and cleaning up the site whenever Cal-ISO determined that it was no longer needed. The plant had been in operations since 1960.

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