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Paying for Coal Ash Cleanup

This week starts the Duke Energy rate case. One of the most contentious issues in the rate case is who should pay for coal ash cleanup. Duke Energy Progress is seeking recovery of coal ash cleanup expenses from Sept. 2017 through February 2020 for its Asheville, Sutton, Cape Fear, H.F. Lee, Weatherspoon, Robinson, Mayo and Roxboro sites. $135.5 millions of their proposed rate increase is designated for that purpose.



The Dan River Spill

No one can forget the February 2014 spill when a Duke Energy coal ash pit spilled more than 39,000 tons of toxic coal ash into North Carolina’s Dan River, creating an emergency and raising concerns for communities for miles downstream. Although the EPA does not consider coal ash “toxic” or “hazardous” waste––calling it “industrial waste” instead––communities impacted by coal ash believe it is dangerous and harmful to human health.

The Dan River spill led to passage of the NC Coal Ash Management Act and the majority of the N.C. Department of Environmental Quality’s work has been prioritizing plans to close all 14 facilities with coal ash storage ponds. Duke Energy – in a settlement with the N.C. Department of Environmental Quality and environmental organizations - agreed to clean up the coal ash out of the current unlined, leaking pits.


Clean Up Costs

The total clean-up cost ranges between $8-9 billion for the 80 million tons of waste and the costs of lined basins to hold the waste. Back in 2018, the N.C. Utilities Commission (NCUC) gave approval for Duke Energy Progress to raise customers' fixed monthly charges by 25 percent and granted the utility rate increase of $232 million to pay for coal ash cleanups. But the N.C. Utilities Commission in 2018 looked very different than it does today.


Attorney General Petition


In the aftermath of the 2018 Commission decision, Attorney General Josh Stein filed a brief with the North Carolina Supreme Court to appeal the rate case arguing that Duke Energy’s coal ash costs were not property that is used and useful for providing current service to customers. The brief continued with the argument that Duke Energy knew that coal ash was risky and would pollute the groundwater, and they did not act in the public’s best interest when they had the opportunity. Duke Energy has a history of Clean Water Act violations dating back to 2015 when they pled guilty to nine misdemeanors in federal court by discharging pollutants into nearby waterways through their coal ash ponds.


It is not clear when a decision with the N.C. Supreme Court will be made. At most, a favorable decision might impact how the current Commission interprets the 2017 rate case ruling as precedent or might change their justification that they present for their decision. The Supreme Court could find that the NCUC's ruling was "arbitrary and capricious". That would send it back to the NCUC and they could either change its ruling based on the Supreme Court ruling, or it could change its justification but keep the same ruling, hoping the new justification would not be ruled arbitrary and capricious.


The New Utility Commission


In July 2019, three new Commissioners were appointed - Kim Duffley, Jeff Hughes, Floyd McKissick and Charlotte Mitchell became chair – with very different backgrounds than former Commissioner Ed Finley, who represented utility companies. (Check out my interview with Energy News Network for more details here). When Dominion Energy filed for its rate case earlier this year, the NC Utilities Commission ruled that no recovery of coal ash cleanup would be allowed. Between the pending North Carolina Supreme Court case and an unfavorable ruling toward Dominion, it is unclear if Duke will get the ruling, they want this time around.

Utilities have, for the most part, argued that they routinely pass on the costs of complying with environmental regulations, so closing coal ash ponds should be no different. But that argument may not fly. From the Attorney General’s petition to the court there is an emphasis on Duke’s practices to manage coal ash from their power plants for decades and that this does not meet the reasonableness test, nor are mismanaged ash ponds considered property, and the disposal of the ash ponds does not make them “used and useful” for purposes of allowance into the rate base.

Stay tuned for an undoubtedly interesting discussion as this week unfolds.

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© 2020 by Diane Cherry Consulting.