A coal-fired power plant along the Potomac River that environmentalists have been targeting for years will shut down for good next year.

The City of Alexandria and GenOn, the owner of the Potomac River Generating Station, announced Tuesday that the plant would close by Oct. 1, 2012.

The deal was struck after city officials agreed to grant the company tax breaks worth about $2 million a year until the land is sold to a developer. The city also will return to the company $32 million that was supposed to finance new pollution controls the city was requiring at the plant.

Environmental groups hailed the closure as a victory. For more than a decade they had decried the plant's emissions as a health threat to area residents. The Sierra Club launched a campaign earlier this summer to warn residents about coal-fired plants, linking the Potomac plant to asthma problems in D.C. children.

History of a power plant
1949: The Potomac River Generating Station begins operations.
2000: Mirant purchases the power plant from Pepco.
2004: The city of Alexandria launches a series of lawsuits against the plant, complaining about pollutants.
2008: Mirant settles with Alexandria, agreeing to install $34 million in upgrades to make the plant more environmentally friendly.
June 2010: The EPA issues new sulfur dioxide standards that many predict will cost power plants millions over the next few years.
December 2010: Mirant merges with RRI Energy to form GenOn.
July 2011: The Sierra Club launches a campaign to close the plant.
August 2011: GenOn agrees to permanently close the plant.
October 2012: Proposed closing deadline for plant.

"I just found out this morning, and I was shocked because I never knew when or if this day would ever come," said Elizabeth Chimento of Alexandria, who helped kick-start the local scrutiny of the plant. "I'm just trying to put my arms around it."

Alexandria officials, who sued in 2004 to close the plant, praised the shutdown.

"This is great news," Mayor Bill Euille said. "We have been pushing this for many, many years."

The plant, which supplies Pepco and other utilities with energy, may have to operate beyond the Oct. 1, 2012 deadline if federal, state or electrical grid approvals are delayed. But if it remains open beyond Jan. 1, 2014, GenOn would have to pay the city $750,000.

A GenOn spokesman said its decision to close the plant was entirely economic, based on the low price of competing natural gas and looming federal environmental regulations that could cost the plant even more in required upgrades. The plant has been dormant for months over the last year because of low demand.

"Retiring the facility next year makes sense for GenOn, but it is a difficult decision given the impact on the approximate 120 employees who work at the station," said GenOn CEO Edward Muller.

The energy company, formed last year by the merger of RRI Energy Inc. and Mirant Corp., faced rough times after losing a top executive last week and seeing its stock hit a 52-week low.

Environmentalists said they would keep pushing for plants like Alexandria's to shut down.

"Any time a coal plant shuts down it's a big deal. But this is just the tip of the iceberg," said Robert Gardner of Greenpeace. "We want to see the nation transfer its energy use, and that's not going to happen until coal plants across the nation are shut down."