Coal Ash Issue

June 18, 2014

NC AG: Make Duke Energy pay for coal ash fix

N.C. Attorney General Roy Cooper is urging state lawmakers to spare the public from paying the potentially billions of dollars that Duke Energy will incur if the legislature passes a bill to fix leaky coal ash lagoons.

N.C. Attorney General Roy Cooper has become the latest Duke Energy critic to urge state lawmakers to spare the public from paying billions of dollars Duke would incur if the legislature forces the power company to fix leaky coal ash lagoons.

Cooper has joined a chorus of environmental advocacy groups insisting the Charlotte-based electric utility should absorb the costs of environmental compliance arising from the storage of coal ash, a byproduct of burning coal at power plants.

“I realize this issue is complicated and that utilities are entitled to reasonable cost recovery in most instances,” Cooper wrote to Republican Sen. Tom Apodaca, who sponsored a coal ash cleanup bill this week. “However, in this situation it is better to come down on the side of the consumer.”

Cooper’s push to make Duke and its shareholders eat the cost of coal ash storage exposes a political divide on an issue utility experts say is a non-starter. Cooper, a Democrat, is expected to run against Gov. Pat McCrory in the 2016 gubernatorial race, and has successfully challenged utility rate increases in state courts.

Duke officials have said the costs could be $10 billion if the company is required to dig up the ash in several dozen lagoons and transfer the waste to lined landfills. A reclamation project of that magnitude could cost electricity customers in North Carolina more than $20 a month.

Republicans haven’t threatened to stick Duke and its shareholders with a massive cleanup bill. In a press conference last month, Republican Sen. Phil Berger, the Senate’s President Pro Tem, said the legislature shouldn’t meddle in utility policy, saying questions of cost recovery are best left to the judgment of the N.C. Utilities Commission.

Under North Carolina law, the costs of environmental compliance are subject to approval by the Utilities Commission. Customers generally pay those costs as part of their utility service.

The 2002 Clean Smokestacks Act was perhaps the most high-profile example of anti-pollution fixes mandated by the legislature. The law required Duke Energy and Progress Energy to pay $2.9 billion in upgrades and retrofits to coal-burning power plants, and the costs were covered by customers in their utility bills.

Raleigh lawyer Ralph McDonald, who represents industrial power users before the Utilities Commission, said state law allows a regulated monopoly utility to recoup its operating costs from customers as long as they are reasonable and prudent.

“They would normally recover it and if they’re not allowed you’ve got a question of taking their property without just compensation,” McDonald said.

The Republican bill proposed this week in the state Senate would force Duke to stop storing the ash in wet ponds, which are percolating contaminants into groundwater. But the bill leaves the utility with the option of draining the water from the ash and storing the waste in place. The price tag won’t be known until Duke knows how much of the ash will be moved to lined landfills and how much will be dried out and kept where it is.

Duke has pledged to pay for cleaning up the Feb. 2 coal ash spill into the Dan River, which the company said was an accident. But that generosity won’t extend to the other coal ash pits where accidents haven’t taken place.

Duke CEO Lynn Good has said the expense of bringing all 33 ash disposal sites across the state up to modern safety standards would be paid by customers. Those ash disposal sites were built over decades according to industry practices at the time and with approval from state officials.

Environmental groups didn’t challenge North Carolina’s coal ash pits until a major spill in 2008 at a site owned by the Tennessee Valley Authority drew attention to the conditions of the nation’s ash pits.

Who will ultimately pay for drying out and storing Duke’s coal could involve the question of negligence. Federal prosecutors are conducting an investigation of Duke’s coal ash storage practices, with the potential of discovering improper activities.

If Duke were to be found negligent, then the company could have a harder time demonstrating its remediation costs are prudent and reasonable.

The state’s pending lawsuit against Duke’s ash pits could also elicit key information.

Last week, for example, state regulators ordered Duke to submit repair plans for leaky pipes at coal ash impoundment dams at five power plants.

On Wednesday, the N.C. Department of Environment and Natural Protection issued another deficiency letter for gushers and drips at pipes at the company’s Weatherspoon Steam Station in Lumberton.

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