The answer has been revealed to the "mystery settlement" announced yesterday by City Attorney Dennis Herrera. And as soon as we saw Supervisor Sophie Maxwell and Public Utilities Commission head Ed Harrington in the City Hall elevator, we guessed it -- it's Mirant!

Herrera this morning signed off on a settlement that ends years of legal wrangling with the owners of the smoke-belching Potrero Hill power plant -- and "shuts it down irrevocably" by Dec. 31, 2010. What's more, the company will pay the city $1 million to "help address pediatric asthma in nearby communities" and another $100,000 to cover city attorneys' costs.

Should the Board of Supervisors and Mayor sign off on the settlement, it will nullify all existing litigation in place against Mirant. It will also nix, once and for all, the notion of city-operated "peaker plants" -- so-called because they'd only switch on when needed to generate additional Megawatts during peak hours. You may recall the brouhaha regarding those peakers, which pitted environmentalists against public power advocates

The city's plan to sell off the four G.E. combustion turbines it purchased with the notion of erecting peaker plants will move ahead.

"There can never be any fossil-fuel generation on that site," Herrera said. "The retrofitting of any [combustion turbine] units, whether they be Mirant-owned or city-owned is not on the table. It's done."

At some future date -- the city attorney's office is not sure when -- a city delegation will make its case to the California Independent System Operator, the state agency responsible for determining the California's power needs. PUC-head Harrington outlined the city's argument for being permitted to shut down the Mirant plant -- which is capable of generating 200 of the roughly 900 MW of power consumed by the city daily.

Harrington argues that the completion next year of the transbay cable, plus PG&E transmission lines on the Peninsula will pick up most of the slack -- as will reduced power needs due to the recession. What's more, Herrera feels that Mirant itself stating it wants to close the plant will sway the state regulatory body.

Harrington added that Cal-ISO's determination of how much reserve power generation San Francisco needed was "overly cautious." A shortage of 25 MW was "hypothetical, if two major power transmission cables went down on the peak hour of the peak day and no one ever made any change in their behavior when it happened."

Our messages for Mirant spokesman Chip Little querying what Mirant got out of this deal have not yet been returned. Herrera said the company determined that, facing ongoing political and legal pressure, Mirant ruled that this settlement -- and payout -- was "in the company's best interest." 

Mirant will also receive "an expedited review" for any plans they propose for the company-owned land the 40-plus year old plant currently sits on (Herrera made sure to note that there is no guarantee the review will be "approved" as well as "expedited."). Mirant consultant Sam Lauter said that the company currently has no development plans for the site.

Supervisor Sophie Maxwell -- a veteran advocate of shutting down the Potrero plant -- will introduce the proposed settlement to the Board on Tuesday. Rather oddly, she urged her "new colleagues" to be open-minded, because they "may hear negative things" before then. Say what? It's hard to imagine what city politician would say that, yes, he or she supports the aging, structurally unsound smoke-spewing power plant blighting the city's poorest sector -- but, then, perhaps Maxwell is still smarting over the Board's reversal years ago on its plan to buy those combustion turbines and build peaker plants.

Herrera was more to the point.

"When we had the peaker plant discussion about a year ago, what we heard folks in this building [City Hall] and outside this building saying was we don't need additional dirty power plants in San Francisco. Let's just convice Cal-ISO and the regulators we don't need anything in addition," he said.

"Here we have a plan that does exactly that. To be quite honest, I would be very, very disappointed if someone comes out and says he has a problem with this deal that irrevocably commits Mirant [to leaving] the power business [in San Francisco]. We got them to sign on with exactly what people were saying they wanted a year ago."

Update, 1:30 p.m.: Mirant spokesman Chip Little responded to our e-mail querying what, exactly, his company got out of this deal: "From the settlement Mirant Potrero gets the city to drop its lawsuit against Potrero regarding the UMB [Unreinforced Masonry Building] ordinance. The City agrees to support any permits required for continued operations of the Potrero Plant through the end of 2010. The City agrees to give Mirant Potrero or any successors priority processing of a new site plan and waive city costs when Mirant Potrero redevelops the Potrero property."