The Chula Vista City Council decided Tuesday to cease negotiations with the Houston-based power company Dynegy to remove the cumbersome South Bay Power Plant.
Chula Vista has incurred more than $220,000 in outside counsel legal fees since September to negotiate the terms of the deal, initially negotiated by former city councilman and port commissioner David Malcolm.
Malcolm negotiated the deal for the San Diego Unified Port to purchase the plant and the land it sits on in 1998 and was asked to offer clarifications by Chula Vista Councilman Rudy Ramirez to help the public and council understand his involvement with the power plant.
Chula Vista Mayor Cheryl Cox and Councilwoman Pamela Bensoussan said they involved Malcolm in discussions because he knows the language of the agreement.
“This was a no-risk deal – it was never meant to be anything different than that,” Malcolm said.
City Manager Jim Sandoval said that no agreement between the city and Dynegy would have moved forward without cap insurance and bonding more than 150 percent of the estimated cost of the liability.
Chula Vista Councilman Steve Castaneda said the entire city council was not informed of negotiations until November last year. “What we were told and what I voted on was that Dynegy would pay for a feasibility period so that Chula Vista would have no liability whatsoever, we’re almost at 120 days, yet we have bills in excess of $220,000,” he said.
The city’s attorneys said they had a verbal agreement for a reimbursement of attorney’s fees and due diligence costs from Dynegy but the company has not paid up.
“It boggles the mind how we could have had a verbal agreement on something so important, why wasn’t it in writing?” Ramirez said.
Malcolm said that Dynegy will either go bankrupt or be taken over by a New York hedge fund. “Either way it’s bad for Chula Vista,” Malcom said. “If I were you, I’d order my port commissioner to get control of that $22 million. I think it’s a pretty smart thing to be able to control your future.”
Chula Vista residents have paid $42 million to Dynegy so far to clean up the plant.
City officials have decided on a demolition first approach to remove the shuttered power plant, followed by remediation. They have also created a joint planning team charter with the port, setting objectives and ground rules to the bifurcated process.
Senior City Attorney Bart Miesfeld said that looking back it might have been best to not negotiate with Dynegy until they agreed to pay the city money.
Had the city made that deal, it would have had access to leftover money from the approximately $70 million set aside by several agencies for clean-up.
Laura Hunter of the Environmental Health Coalition urged city officials to get control of the $20 million plus, saying the most important aspect of the process for the coalition is do it correctly, then expeditiously.
Malcolm said if he had not gotten involved, the plant would still be in operation.
“They wanted out – they just needed someone to take the lead,” Malcolm said. “I just happened to be someone who could negotiate and end this for Chula Vista.”
Councilwoman Patricia Aguilar said the city needs to do two things: “Cut our losses and make sure this never happens again,” she said. “Lets stop the bleeding and continue working with the port.”
