Mayor Gavin Newsom and officials from the California Independent System Operator, which oversees operation of the state's electrical grid, made the announcement at a 10 a.m. news conference at the plant, located at 1201 Illinois St.
The Potrero Hill power plant, owned by GenOn Energy, formerly Mirant Corp, was considered one of the dirtiest in the state. Residents in the southeastern part of the city blamed the pollution for higher rates of respiratory and other health problems.
Community groups and city officials, including Supervisor Sophie Maxwell, in whose district the plant sits, have been crusading for years to close it.
The city was able to shut down a similar plant in nearby Hunters Point in 2006.
Cal-ISO officials said that a new underwater 400-megawatt electrical transmission cable coming online from the East Bay this year, and recent upgrades to transmission cables from the Peninsula, would ensure that the local grid will have enough power without the Potrero plant.