Southern California Edison (SCE) has been trying to fix problems which came to light last year after a minor leak in one reactor at the San Onofre plant, north of San Diego in southern California.
But SCE parent company Edison International's chairman Ted Craver said experts had finally concluded that they cannot resolve the problems quickly or comprehensively enough.
"We have concluded that the continuing uncertainty about when or if (San Onofre) might return to service was not good for our customers, our investors, or the need to plan for our region's long-term electricity needs," he said.
Anti-nuclear activists hailed the announcement. "It has great national implications and is a real strong message that this nation does not need nuclear power," Shaun Burnie, of Friends of the Earth, told the newspaper.
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Democratic US Senator Barbara Boxer said she was "greatly relieved that the San Onofre nuclear plant will be closed permanently... This nuclear plant had a defective redesign and could no longer operate as intended."
A first reactor at San Onofre was shut down in January last year after a radiation leak, although the Nuclear Regulatory Commission (NRC) said there was no danger to the public.
Subsequent investigation showed that more than 3,400 tubes in new steam generators at San Onofre were damaged.
San Onofre produced enough energy to power 1.4 million homes, according to SCE. California's only other nuclear reactor, at Diablo Canyon between Los Angeles and San Francisco, is run by Pacific Gas and Electric Company.
Dan Dominguez of the Utility Workers Union of America lamented the job losses, and believed the plant could be salvaged. "But the decision's been made, so we'll have to deal with the consequences," he told the LA Times.