May 6, 2010 / 12:03 AM / 10 years ago

UPDATE 1-California okays coastal power-plant modifications

* Water board adopts rules to restrict use of ocean water

* Rules to force closure, changes at 19 power plants

* Compliance dates stretch past 2020 for nuclear plants

* Retrofit cost at two nuclear plants pegged at $7 billion (Adds cost for nuclear retrofit, company comment)

HOUSTON, May 5 (Reuters) - California water resource regulators, seeking to protect marine life, approved a policy late on Tuesday that will force closure or costly changes at 19 coastal power plants that use ocean water to cool equipment.

The policy, which calls for reduction of ocean water use by 93 percent over a period of years, would affect power plants totaling 23,000 megawatts.

This is more than one-third of the installed capacity in the state and would include California’s two nuclear stations, Southern California Edison’s (EIX.N) 2,150-megawatt San Onofre nuclear station near San Diego and PG&E Corp’s (PCG.N) 2,240-MW Diablo Canyon station north of Los Angeles.

The policy to largely replace ocean water cooling systems has been under development for about five years. It involved input from state environmental and power-related agencies, consumer groups opposed to local plants and marine protection groups.

Power plants that draw water from the ocean to cool turbines and other equipment also trap fish larvae, along with a small number of seals, sea lions and turtles, according to the State Water Resources Control Board.

Other power plants that must cut the amount of ocean water used for cooling by 93 percent are mostly older, inefficient natural gas-fired units that do not run often.

But some of the plants affected by the plan are near big cities. They are needed to keep the state’s electric grid reliable during times of high demand or emergencies, according to their owners, including Dynegy DYN.N, AES Corp (AES.N), Mirant Corp MIR.N, RRI Energy RRI.N, NRG Energy (NRG.N) and the Los Angeles Department of Water & Power.

State power agencies recognized in 2005 that most of the coastal plants would be retired or replaced by new generation over time, Mike Jaske of the California Energy Commission told water board members at a meeting on Tuesday.

“We are in a long-run endeavor together,” Jaske said.

But consumer and environmental groups argued that compliance should come as quickly as possible to protect marine life.

SCE said advanced technology at San Onofre returns 95 percent of the adult fish that enter the nuclear plant’s intake system unharmed to the ocean. SCE’s ongoing mitigation efforts, including a wetlands restoration project and an artificial reef “more than offset” the remaining impact of the nuclear plant.

The cost to retrofit San Onofre could be $3 billion, SCE said.

PG&E, which will eliminate use of ocean water in its cooling system at its Humboldt Bay gas plant later this year, said the cost to retrofit Diablo Canyon — its last plant using ocean water — could reach $4.5 billion.

Dynegy, owner of about 4,200 MW of plants operating near the coast, shut some units near San Diego last year and has said it will retire other units if not required for grid reliability.

Mirant has also said it will shut some smaller gas units in 2013 when power purchase contracts expire.

The State Water Resources Control Board policy will require power plant owners to file details of their compliance plans over the next six months.

The order calls for some plants to comply as soon as one year after the policy goes into effect.

Others are scheduled to comply over a number of years before 2020 to allow the older units to be modified, replaced or to allow grid upgrades to be completed so that the plants can be shut permanently.

San Onofre is scheduled to come into compliance by 2022 Diablo Canyon is set to comply in 2024 after additional studies are completed, according to the agency. (Reporting by Eileen O’Grady; Editing by David Gregorio and Carol Bishopric)

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