Duke CEO: Customers should pay ash pond costs

bhenderson@charlotteobserver.comMarch 7, 2014 

Duke Energy expects its 3.2 million North Carolina customers to pay the costs of closing its ash ponds, CEO Lynn Good said Friday.

Duke is preparing a response to Gov. Pat McCrory’s request last week that his former employer supply options, costs and other details for dealing with its ash ponds by March 15.

McCrory’s demand added to the pressure on Duke, after a disastrous spill last month on the Dan River, to move millions of tons of ash away from water supplies such as Charlotte’s Mountain Island Lake.

Duke is making it just as clear that closing its ponds will be an expense – likely to run into the hundreds of millions of dollars – that customers should pay. Duke has said the company and its stockholders will pay the costs of cleaning up the Dan River.

Good, in a brief interview after receiving the BusinessWoman of the Year award at Queens University of Charlotte, gave no hint of how Duke would respond to McCrory.

Asked whether Duke expects its customers to pay for closing its ponds, including removing ash, she indicated it did.

“Ash pond closure has been a plan for a very long time,” she said. “And because that ash was created over decades for the generation of electricity, we do believe that ash pond disposal costs are ultimately a part of our cost structure.

“But the determination of payment will be up to the North Carolina Utilities Commission and how that they handle that, so I think that’s something that will unfold over time.”

Attorney General Roy Cooper, who has appealed three recent rate hikes by Duke, said he’ll also oppose attempts to bill customers for ash.

“Duke Energy should clean up the coal ash at its own expense, and we will fight for consumers if the company tries to charge them,” Cooper said in a statement.

What influences the outcome

The Utilities Commission lets utilities recover “prudent” capital costs, such as for new power plants, through customer rates.

Duke has also been allowed to recover the costs of state-imposed environmental measures. Those include the 2002 Clean Smokestacks Act, which ordered strict emission limits on coal-fired power plants. Duke and the former Progress Energy spent $2.8 billion to comply with the law.

Now the state’s Environmental Review Commission is hashing out legislation on ash ponds. If lawmakers order Duke to close or move ponds, the company would have good reason to expect it would recover those costs.

Duke’s chances would dim, however, if its ponds are shown to violate state standards. State environmental regulators have already charged Duke with violations at Dan River and five other power plants. A federal grand jury is also investigating.

Duke could also voluntarily move its ash to buff its public image, which has been battered by pictures of ash soiling 70 miles of the Dan and claims the company is too friendly with state regulators.

Officials want more facts

Consumer advocates at the Utilities Commission say it’s too soon to take a position on whether customers should pay the ash bills.

“It depends on what Duke is going to present as its cleanup plan and what it is required to do in terms of cleaning up ash ponds,” said Christopher Ayers, executive director of the commission’s Public Staff. “We can’t comment or speculate as to what would be recoverable, and not be, until we see the specifics of a plan and what is required by state regulators.”

Good said Duke’s response plan will aim to “ensure safety, good environmental stewardship and doing the right thing for the citizens of North Carolina.”

McCrory’s office was noncommittal on costs.

“At this point we’re still gathering information and we have asked Duke to send their plans to DENR, but at the end of the day this will be handled by the Utilities Commission,” spokesman Ryan Tronovitch said. “The governor has stressed that there needs to be an ongoing public dialogue and that certainly applies to the costs of cleanup as well.”

S.C. will recycle its ash

In South Carolina, state-owned utility Santee Cooper expects to spend $250 million over 10 to 15 yeas to excavate ash from its seven ponds at three power plants. The ash will be recycled as an ingredient in concrete. The ponds will be turned into wetlands.

“Ultimately our costs are paid by our customers,” said spokeswoman Mollie Gore, who noted that Santee Cooper has no shareholders. “Every solution for closing ash ponds carries a cost with it. This is a cost-effective solution for our customers that also creates jobs and environmental benefits.”

Duke has 32 ash ponds at 14 North Carolina power plants. Duke expects to spend $4.5 billion to $5.5 billion on environmental costs in its six-state territory over the next decade, including closing ash ponds.

Henderson: 704-358-5051; Twitter: @bhender

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