San Francisco Mayor Gavin Newsom, facing opposition from environmentalists and allies on the Board of Supervisors, backed away from a plan to build a $273 million debt-financed power plant in the city’s Potrero Hill neighborhood.

The proposed natural-gas-fired power peaker plant — which would run only during times of peak electricity demand — would have replaced an aging Mirant Corp. electric plant that runs on diesel fuel. The city planned to issue certificates of participation to finance the project, which was to be run by the San Francisco Public Utilities Commission and include an additional generator at San Francisco International Airport.

Newsom and peaker plant supporters said it was a necessary evil that would pollute less than the existing Mirant plant and meet California Independent System Operator requirements that the city maintain the capability to produce some of its own electricity. The ISO manages the state’s electricity grid.

But the proposal to build a new fossil fuel-powered plant in environmentalist San Francisco drew condemnation from even Newsom allies like Supervisor Michela Alioto-Pier.

The ISO also said it would allow the city to undertake a short-term fix of retrofitting the existing Mirant plant to run on biofuels or natural gas while San Francisco seeks an alternative solution to its electricity needs. It also agreed to accept the closure of the most polluting Mirant generator when a high voltage transmission cable is installed under the San Francisco Bay.

“Mirant Corp. has also agreed to upgrade its existing turbines to reduce emissions and to run the retrofitted turbines for reliability needs only,” Newsom said in a letter to the board. “This commitment will mean overall emissions from the retrofit alternative will be lower than the emissions from the proposed project.”

The retrofit will be cheaper than a new plant, and the city will not have to pay for it. Mirant will pay the cost of $50 million to $70 million, Newsom’s letter said.

“We must, however, resolve the need to create 150 megawatts of generation within the city,” the mayor wrote. Retrofitted turbines generate less electricity than the dirty plant.

As such, Newsom asked the Board of Supervisors to delay action on the peaker plant project until his staff and the Public Utilities Commission develop a more definite proposal sometime next month.

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