The 40-year-old fossil-fuel plant, which officials say is one of the dirtiest in the state, spews particles and chemicals from a bayside smokestack. Its cooling system, which sucks in millions of gallons of bay water per day, kills fish larvae and discharges heated water into San Francisco Bay.
The settlement appears to end a decade-long contentious debate among city officials, community leaders, energy providers and environmentalists about whether the plant, located south of Mission Bay, should be retrofitted or closed.
It is not yet certain, however, if state energy officials will allow it to be closed.
In April, Herrera sued Atlanta-based Mirant for failing to retrofit brick buildings on its property, but it was clear that the intent of the suit went beyond making the buildings safe.
"This is a major step forward for a San Francisco that will be cleaner, greener and healthier because of what we've achieved today," Herrera said of the settlement at a news conference.
The legal accord that would end the lawsuit obligates Mirant to shutter the plant by the end of 2010 and work with the city to overcome possible objections from state energy monitors. The company also would pay $1 million for health initiatives in the neighborhood, including possible asthma clinics.
In return for its pledge to close the facility, Mirant, which owns the property, will get expedited city review for any future development projects. Herrera also retracted his demand that the five unoccupied brick structures on the site be fixed.
Mirant spokesman Chip Little said the company agreed to the settlement because it wanted to end the lawsuit and saw benefits in the city's other promises.
The settlement must be approved by the Board of Supervisors and Mayor Gavin Newsom.
Yet a potentially much bigger hurdle for closing the plant is the California Independent System Operator.
The ISO ensures that cities have reliable energy supplies that can withstand power line failures and other emergencies. The agency has demanded that San Francisco have some power generation within city limits.
The city has told the ISO that it can meet the energy reliability requirements through multiple sources, including a 53-mile transmission cable that will run under the bay to Pittsburg. That line is scheduled to start delivering power from East Bay fossil fuel plants by spring. Renewable sources, including solar power, and greater energy efficiency would also help meet demands, city officials have said.
Herrera said the city would present a formal plan to the ISO in the coming months but did not commit to a date.
The power grid monitor reacted cautiously to news of the legal settlement.
The ISO's role "is to protect system reliability and safety for the citizens of San Francisco and California without regard to local politics or economic interests," ISO spokesman Gregg Fishman said in a statement. "The ISO will continue to require local measures to be available at the level necessary to ensure that San Francisco reliability is consistent with that of other major metropolitan areas."
Residents in the Dogpatch neighborhood, where the plant is located, said they have waited a long time for it to close. A Pacific Gas and Electric Co. plant near the shoreline in Hunters Point closed in 2006 after long-standing community opposition.
"We are thrilled and would like to see it shut down as soon as possible," said Janet Carpinelli, president of the Dogpatch Neighborhood Association. "The talk has gone back and forth as the pollution has continued all night long and every day."