Rulings Mean Consumers Could Pay Billions For Coal-Ash Cleanups
A string of decisions by North Carolina regulators this year means electricity consumers could be seeing a multibillion-dollar bill to clean up mountains of waste Duke Energy created over decades burning coal to produce power.
State utilities regulators now have ruled that both of the company's North Carolina divisions may charge ratepayers the first $778 million chunk of a cleanup projected to cost about $5 billion.
Cleanup became a priority after a major leak from a Duke Energy site in 2014 left coal ash coating 70 miles of the Dan River on the North Carolina-Virginia border. The waste byproduct contains toxic metals like lead, mercury and arsenic.
The company pleaded guilty to federal environmental crimes in 2015 for its coal ash handling, and thus admitted "pervasive, system-wide shortcomings," the North Carolina Utilities Commission said in its ruling last month allowing a Duke Energy Carolinas rate hike.
North Carolina Attorney General Josh Stein said he's going to court to try stopping Duke Energy from passing along its costs to excavate some ash pits and cover others. Corporate mismanagement increased costs that shareholders should also be forced to bear, he said in an interview. Duke Energy said that it followed industry practices and applicable regulations.
"This case will ultimately be decided by the North Carolina Supreme Court," Stein said.
A decision by the state's highest court isn't likely before next year, when 3.4 million North Carolina power customers finally learn if they're on the hook for a bill that's been accumulating for decades.
Decisions by the North Carolina Utilities Commission last month and in February largely agreed with Duke Energy's argument that consumers should pay for cleanup as part of the bill for the affordable, consistent electricity that burning coal had long provided.
It marks one of the commission's most controversial regulatory decisions of recent years. But the precedent for passing on coal ash costs was set last year prior to the Duke Energy decisions in a case involving Virginia-based Dominion Energy, which serves North Carolina's northeast corner, said Don Bailey, who served four years on the commission ending last year.
"The Dominion decision about a year ago may have been some indication of what was going to take place" in the Duke hearings, Bailey said. "It wasn't anywhere near the kind of money we're talking about now."
The two utilities commission decisions Stein promises to challenge involve Duke Energy's two North Carolina subsidiaries.
The company's Duke Energy Carolinas subsidiary, which operates in central and western North Carolina, could charge its customers the $546 million in coal ash cleanup costs incurred from 2015 to 2017, the commission decided June 22.
But the regulator also found fault with Duke Energy's practices and assessed a $70 million mismanagement penalty. The company's "irresponsible management" of its ash pits "has resulted in cost increases greater than those necessary to adequately maintain and operate its facilities," commissioners wrote.
Still, consumers will pay about $476 million of the cleanup cost and the company's shareholders about 13 percent of the subsidiary's bill so far.
In February, the utilities commission allowed the company's Duke Energy Progress operating subsidiary, which serves eastern North Carolina and the Asheville area, to charge customers $232 million for coal ash cleanup costs racked up already. Regulators simultaneously assessed the company a $30 million mismanagement penalty.
North Carolina is Duke Energy's most important territory. The company has 7.6 million customers spread over several states, including South Carolina, Florida, Indiana, Kentucky and Ohio.