Duke Energy responded sharply Wednesday to criticism from the North Carolina Attorney General’s Office and others who have questioned the utility’s opening move toward a rate increase that would help cover its coal ash cleanup costs.
Company lawyers said the critics are wrong in urging the N.C. Utilities Commission to consider the company’s coal ash costs separately in a detailed special proceeding, rather than as part of an overall rate-hike hearing later this year.
The corporate attorneys told the commission in a filing late Wednesday that Duke Energy’s coal ash predicament meets the “criteria for granting a deferral,” a special accounting technique enabling it to set aside more than $700 million in accumulated coal ash costs for consideration in the upcoming rate case.
“The federal government and state of North Carolina have adopted significant new legislation and regulatory requirements obligating the companies to spend significant amounts to comply,” said company lawyers Heather S. Smith and Lawrence Somers, referring to Duke Carolinas and Duke Progress as separate entities.
“Denial of the request would adversely affect the companies’ financial stability,” they added.
Duke Energy’s corporate superstructure has yet to formally request a rate hike, but it has signaled that’s on tap during 2017. Currently on the table for the appointed, seven-member Utilities Commission to decide is Duke Energy’s proposal to log most of its coal ash costs to date in a separate account for consideration later as part of that next general rate hike.
A utility company’s request for a rate hike normally includes many factors such as rising fuel costs, salary growth, increases in other operating costs and maintenance, damage caused by hurricanes and other unforeseen events, and any additional changes that might affect the company’s profitability.
Duke Energy contends that the great majority of its coal ash cleanup costs across North Carolina — expected eventually to top $4.5 billion — are part of the routine life cycle of its 14 active and retired, coal-fired plants.
But there was mounting evidence this week in the Utilities Commission file that Duke’s financial bind vis-à-vis coal ash begets little sympathy from many folks: An environmental group submitted a petition Tuesday to the Utilities Commission that was endorsed by nearly 13,000 state residents and that encouraged the commission not to stick them with any coal ash costs until it holds exactly the type of single-issue, detailed coal ash inquiry that Smith and Somers said was not needed.
“It boils down to this: North Carolina residents continue to recognize that coal ash is a problem that Duke Energy created and believe that Duke Energy should be responsible for the cost of cleanup,” said Brittany Iery of the nonprofit North Carolina Conservation Network that gathered the signatures on its petition in a one-month campaign.
Coal ash is the residue left over once pulverized coal has been burned to help produce electricity, creating an issue of potential pollution brought to the fore in North Carolina three years ago when a pipe burst beneath a storage pond at the retired Dan River Steam Station near Eden to send up to 39,000 tons of the waste material into the adjoining river.
Duke Energy ultimately pleaded guilty to nine charges of criminal misconduct filed by federal authorities and linked to negligence at the now-demolished Dan River plant and four others in North Carolina.
Federal officials do not consider coal ash to be a hazardous substance, but it does contain chemicals such as arsenic that can be harmful to human health when concentrated heavily enough. After the Dan River spill, North Carolina legislators passed a law that requires Duke Energy to safely eliminate its two Eden storage ponds along with 29 others at 13 additional sites statewide by the end of 2029.
The NC Conservation Network petition urging close scrutiny of Duke Energy’s efforts to pass along coal ash cleanup costs to its customers includes the names of 536 Greensboro residents, 72 from High Point, 29 from Summerfield, 24 from Jamestown, 14 each from Browns Summit and Gibsonville, 13 from McLeansville, 11 from Pleasant Garden and five from Colfax — for a total of more than 700 Guilford County residents.
The petition also bears the names of about 1,100 residents of Charlotte, where Duke Energy is headquartered, and more than 1,000 from Raleigh, where the utilities board meets.
“We’ve occasionally delivered a petition like this to a regulatory body, but the response to this one is unprecedented,” Iery said Wednesday in an email. “This petition demonstrates to members of the Utilities Commission that the public has a strong interest in coal ash and any costs that may be passed along to Duke Energy’s customers.”
More evidence that North Carolina residents react negatively to the idea of helping Duke Energy with its coal ash plight came recently in a poll of likely voters by the advocacy group Conservatives for Clean Energy, which found 76 percent of respondents “concerned” about coal ash and 52 percent “very concerned.”
More than 83 percent of those who responded told pollsters that Duke Energy should use its own profits to pay for the cleanup.
The poll that carried a 4 percentage point margin of error queried 600 state residents who voted in at least one of the last two general elections or who had registered to vote since November.
“Voters clearly do not favor a rate increase to clean up the coal ash ponds,” said the renewable energy group that has offices in Raleigh, adding that of the hundreds polled only three respondents thought North Carolina residents should help the company with its coal ash burden after they learned the utility “reported $2.15 billion in earnings for 2016.”
Duke Energy’s legal team filed the company document Wednesday in response to skeptical comments submitted by state Attorney General Josh Stein’s staff and a dozen other “intervenors” in the Duke Energy request, all of whom questioned aspects of the company’s proposed accounting maneuver that would set the stage for a rate hike which could include all coal ash spending except that relating directly to the Dan River spill.
“The companies reiterate their commitment that costs associated with this deferral request do not include fines, penalties, or remediation costs associated with the Dan River pipe break repair and resulting cleanup,” Somers and Smith said of Duke Energy’s corporate entities. “To the extent the intervenors are not satisfied with that commitment, the commission will evaluate the appropriateness of cost recovery in the companies’ upcoming general rate cases.”
But Stein and other intervenors including the Sierra Club, Appalachian State University and the Carolina Utility Customers Association argued that Duke Energy’s coal ash dilemma simply contains too many factors that utility executives brought on themselves or that otherwise beg closer examination than the company’s proposed bookkeeping maneuver suggests.