SLO County drops group in charge of $1 million Diablo Canyon closure study

The Economic Vitality Corporation of San Luis Obispo County is no longer in charge of an economic study to examine the impact Diablo Canyon’s closure will have on the region.

County and EVC officials said the study has just gotten too big for the local business resource group, prompting the county to take over control.

“The project partners are grateful for the work the EVC has done jump starting the project in the right direction,” San Luis Obispo County administrative officer Wade Horton said. “However, project scope and scale grew more complex and we believe now exceeds the EVC’s resources and capacity at this time.”

“We reassessed and took steps to ensure success of the post-Diablo Canyon Economic Strategy project,” he said.

A letter sent to the EVC from the county and its partners on Sept. 11 points to mismanagement with project partners and a contracted consulting firm, as well as missing an important fundraising goal, as reasons for the EVC to step back.

“This project has experienced a number of difficulties, including project delays, project management issues and communication challenges,” read the letter, which was signed by a group of officials including local city managers and Horton.

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The letter goes on to terminate the county’s memorandum of understanding (MOU) with the EVC for the project.

EVC Executive Director Mike Manchak said there were “different expectations” between the parties involved, and echoed that that project grew too large for the EVC to manage on its own.

“When it came down to it, government paid for all this work to date on phase one and phase two, and they felt because they paid for it, they wanted stronger control of it,” Manchak said. “And we said, ‘Heck yeah.’ “

Why a study?

When PG&E announced it was closing the state’s last remaining nuclear power plant once its reactor permits expire in 2024 and 2025, many wondered what the impact of such a massive closure would be on the local economy.

Diablo Canyon is the county’s largest private employer with nearly 1,500 employees.

A 2013 Cal Poly study said the plant has a nearly $1 billion impact on the local economy, but some warn that its closure could have an even larger impact — from loss of jobs, property taxes and public safety support to impacts still unknown.

To help investigate the actual impact the closure will have on the local economy, the county and its local partners launched the post-Diablo Canyon Economic Strategy project in August.

The project, a collaborative effort between the county’s business community and local governments, is expected to take two years and consist of two phases dedicated to delivering a financial analysis of the actual impacts from the closure. It would also create a plan for the sustainable economic future of the region.

The study requires significant funding — at first it was estimated it would cost only $400,000, but that cost has since ballooned to approximately $1 million.

Criticism and moving forward

Securing funding for the study was one of the EVC’s primary goals, and one of the issues that appears to have prompted the switch, according to the letter.

In the letter, the county partners said as of September, the EVC had not met its funding target of $120,000 for the first phase of the project.

“At this stage, your local government partners do not have confidence that the project has a successful financial path forward,” the letter read.

Manchak said that is false — to date, the group has actually raised $253,000 for the first phase of the project. Those donations came from Rabobank, Wells Fargo and a $200,000 grant from the U.S. Department of Commerce’s Economic Development Administration, he said.

He said the grant was an unexpected addition to the funds, since the county isn’t often eligible for similar, highly competitive grants.

Additionally, the letter lists complaints from consulting firm Vital Economy, which the EVC contracted with in May to help analyze the financial and economic impacts of Diablo Canyon’s closure.

The EVC materially breached its contract with the Maryland company, Vital Economy president Francis J. Knott wrote in a supplemental letter attached to the county’s missive.

Knott wrote there were “continued delays to the project; a lack of project ownership and inability to make timely critical path decision; confusion and lack of project understanding of the scope of work; increased uncompensated costs; and an unresolved scope of work addendum ...”

Knott also pointed to confusion over the involvement of the University of Berkeley and the California Public Utilities Commission in the study. (The former is helping with the financial analysis portion of the study while the latter is involved through a state Senate Bill requiring a separate economic study of Diablo’s local impact.)

“The level of misinformation, scope of work confusion within the (Diablo Project Management Team) and clear lack of coherent and coordinated approach to managing the agreement exposed significant project management conflicts that make the effective implementation of the agreement virtually impossible at this time,” the letter read.

Because of this, Vital Economy chose to exercise a clause in its contract that gave the EVC and stakeholders 30 days to resolve leadership and project management responsibilities and cure the breach.

The company sent its letter announcing the decision on Sept. 10.

On Sept. 11, San Luis Obispo County and its partners terminated the MOU with the EVC for the project.

When asked about the Vital Economy contract, Manchak said just that the scope of the project was more than the EVC had initially expected.

“As indicated, the project became more complex and the consulting firm wanted to take it in a slightly different direction,” Manchak said. “However all of the parties seem to be in agreement now and moving forward in a positive direction.”

Manchak added that moving forward, the EVC intends to once again be involved in the study once it reaches the business input and outreach stage.

“We anticipate that the EVC will have an important role to convene the business community in the coming phases, which takes the economic info from phase 1 to develop strategies to mitigate the plant closure,” Manchak said. “We have a very good relationship with the county who now has the lead on the project and we are helping them at every turn. We look forward to determining the roles for each organization for this project into the future.”

“All of our organizations have one goal in mind and are working toward it: helping the community and the economy in the long term,” Manchak added.

Kaytlyn Leslie: 805-781-7928, @kaytyleslie
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