Right now, the N.C. Utilities Commission is conducting the Duke Energy Progress (DEP) rate case and this regulatory body will eventually make a decision on a contentious issue: who should pay DEP’s past coal ash clean up and closure costs? Should it be the ratepayer (you and I) or should it be the Duke Energy Progress’ shareholders?
Coal ash is one of three interrelated issues associated with coal’s continued use. The other two issues include the retirement or closure of coal plants, and a way to pay for “uneconomic” coal assets and its associated financial burdens. This article will discuss coal ash and the following two articles will cover the closure of coal plants and financing that closure.
Coal Ash
Utilities across the country are facing the question of how to recover costs for the handling and disposal of ash at coal-fired power plants. Duke Energy Progress is seeking to recover coal ash expenses from September 2017 through February 2020 for several sites at a cost of $135.5 million.
The Sierra Club hired expert witnesses (LINK) to speak on the issue of coal ash cleanup and the following discussion is based on their testimony. The question regulators have before them is whether the utility acted (1) prudently as coal ash was generated and disposed; and whether (2) the methods they took were economical.
Duke Energy Progress was well aware of the risks associated with the storage and disposal of coal ash. (Constituents found in coal ash include aluminum, arsenic, boron, calcium, hexavalent chromium, iron, magnesium, manganese, silicon, strontium, sulfate, and sulfur – all of which are harmful to health and the environment.) In fact, environmental risks from coal ash was understood and discussed in the electric utility industry as early as the 1970s and 1980s.
Despite that knowledge, Duke Energy Progress continued operation of unlined landfills near streams as coal ash saturated groundwater - without any groundwater monitoring. 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.
Clean Up Costs
After the Dan River spill, North Carolina regulators worked to pass the NC Coal Ash Management Act and Duke Energy is now required to excavate and put coal ash into lined landfills. 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.
Surprisingly, the total capital and operation and maintenance (given in cost per ton) to construct an unlined surface impoundment was more than the cost to construct a synthetic-lined landfill, but Duke Energy still did not transition away from wet handling and disposal of coal ash when it made sense.
Because Duke has a long history of not meeting industry standards in dealing with coal-ash related issues, and their actions were not economically sound, ratepayers should not be on the hook to pay for past and future coal ash cleanup. Shareholders should pay.
The next article will focus on the continued operation of the Duke Energy coal units and the fact that they will remain uneconomic through 2029. The negative values associated with DEP’s coal units means that ratepayers are paying, and will continue to pay, for the uneconomic operation of the Duke Energy coal fleet. Stay tuned as we unpack the next coal issue in this continuing saga North Carolina must exit.
