Clandestine negotiations, fueled by the prospect of a pot of gold set aside for cleaning up the South Bay Power Plant, have become a concern to some city council members and residents of Chula Vista. In late February, Councilmember Rudy Ramirez called for more daylight on the subject; more recently, the council called for a public hearing on the negotiations at the March 22 council meeting.
The South Bay Power Plant has long been a source of pollution and an impediment to Chula Vista’s efforts to develop its bayfront. Dedicated in 1960, the plant was owned and operated by San Diego Gas and Electric until 1999, when it was sold to the Port of San Diego. Duke Energy, the port’s first tenant, leased the plant and the land it sat on for seven years; the plant’s current operator is Dynegy. The plant was shut down on December 31, 2010. Dynegy is obligated to dismantle the plant and clean up the toxic waste on the site.
The first that many people knew of the city’s plan to take on responsibility for the cleanup was an editorial in the Union-Tribune. “[S]ecret talks have led to a potential arrangement under which Dynegy would turn the entire problem over to Chula Vista along with accumulated funds of $72 million to pay for the work,” the November 21 editorial read. “The potential arrangement was brokered by David Malcolm at the request of Chula Vista Mayor Cheryl Cox.”
This peephole into remediation negotiations generated concerns expressed privately, in letters to the editor, and on the council dais. Was the city of Chula Vista capable of doing the cleanup without taking on huge liabilities? If there was money left over, how should it be spent? Why were some members of the council kept in the dark? But for many, the main concern was, what part did Malcolm play in these sensitive negotiations that involved the cleanup of port land?
Malcolm, a former Chula Vista city councilman, was appointed to the Port Commission in 1995, and he served until 2002, when he resigned. During his tenure, he took a leading role in the port’s acquisition of the South Bay Power Plant and in the lease agreement with Duke. Months after Malcolm’s resignation, he pled guilty to a felony conflict-of-interest charge in San Diego Superior Court. While he’d been a port commissioner, he’d also been paid $20,000 a month by Duke Energy to represent its interests. (The conviction was later expunged from his record.)
Fast-forward to February 6, 2011, when Malcolm jumped into an email conversation about the power plant that was taking place between members and friends of a Chula Vista community group called Crossroads II. Malcolm’s email laid out his driving concern that Dynegy was about to be taken over by a hedge fund, which might not share the city of Chula Vista’s sense of urgency to tear down the power plant or remediate the site.
Malcolm wrote: “…I told Mayor Cox and Councilwoman Bensoussan we need to make a deal with Dynergy [Dynegy] before Carl Ichan/Hedge Fund get[s] control of the plant. You read a little about the agreement to pay the City of CV $72,000,000.00 upfront to take their clean up responsibilities. This was an OPTION for 120 days for free!... Unfortunately, Steve Padilla gave a copy of the agreement I made with Dynergy to the Port. Well guess what…..The Port wanted the money [the rent paid by Dynegy] and worked the press to kill the deal the City had with Dynergy.… I almost called Peter [a Crossroad’s member] and briefed him on what we were doing because I didn’t trust Padilla.…”
Steve Padilla was the city of Chula Vista’s representative on the port commission on October 18, when he gave the agreement to the port. Padilla was abruptly replaced in early January. On February 18, Icahn’s attempted buyout failed, and on March 8, Dynegy announced that it may be forced into bankruptcy.
The day following his email, on February 7, I interviewed Malcolm. Malcolm said he stood by everything he had written. He elaborated on who made up the team that had been negotiating with Dynegy. He said the team consisted of himself, Chula Vista mayor Cheryl Cox, Councilmember Pam Bensoussan, Laura Hunter from the Environmental Health Coalition, and former California senator Steve Peace. Peace is best known as the author of energy deregulation in California, which set the stage for San Diego Gas and Electric’s sale of the South Bay Power Plant to the port.
Malcolm detailed the way the negotiations with Dynegy had unfolded. He said that he became involved when a Dynegy consultant expressed frustration about the failure of the port to negotiate the closure of the power plant with the state agency, the Independent System Operator. While he talked, Malcolm pulled up a timeline on his computer and said the first team negotiations took place on August 28, 2010. He was in Texas at the time and had to participate via telephone.
The mayor gives a different account of how and when Malcolm became involved in the negotiations. On February 6, following Malcolm’s jumping into the email conversation with the Crossroads group, Mayor Cox also unexpectedly joined the online conversation: “When the California Independent System Operator…informed me in October that they removed Reliability Must Run status from the South Bay Power Plant, their action triggered a response from the Regional Water Quality Control Board and the State Water Quality Control Board.… That weekend, I called David Malcolm, the author of the agreement that in l998/99 that called for the Plant’s demolition, removal, and remediation by February 2010, in order to learn more about the terms of the agreement from its author.”
The mayor repeated her account of the timeline at a March 1 council meeting. Councilmember Patricia Aguilar asked the council, “How did David Malcolm become involved in the negotiations and to what extent is he involved?” Cox reiterated that she had called him in October. She added that she saw his role not as a negotiator but rather as being available should anybody want to contact him for information. City manager Jim Sandoval said he had never received any direction one way or another about whether Malcolm was authorized to negotiate for the city.