Publisher's note: The author of this post is Jon Sanders, who studies regulatory policy for the John Locke Foundation.
Prior to April 2019, Duke Energy had agreed with the state Department of Environmental Quality (DEQ) to close and excavate all but nine of its 31 coal-ash basins. DEQ had rated the remaining basins as "low risk," which allowed Duke to use the much less expensive method of draining and capping them.
That month, however, Gov. Roy Cooper's DEQ ordered Duke to excavate the remaining sites, a sudden decision that made the cost of coal-ash cleanup significantly more expensive.
Who should bear the cost of this cleanup?
In 2014, when Roy Cooper was attorney general planning to run for governor, he urged legislators specifically to prohibit Duke Energy from being allowed to pass the costs to clean up its coal ash basins on to its retail electricity customers. Here is Cooper's letter to Senator Tom Apodaca, June 18, 2014, about Senate Bill 729(which would eventually become law).
- I remain concerned that this proposed law will allow the public utility to unfairly charge customers for the cost of these actions. Rather than issuing a moratorium through 2015 to the Utilities Commission, as this bill does, I encourage the Legislature to prohibit the Commission from authorizing utility rate increases related to these costs.
The two words that stand out here are "unfairly" and "prohibit." Cooper expressed a view that it would be unfair to Duke's customers for them to be charged with the coal-ash cleanup and related costs. He sought bill language to prohibit the utility from getting rate increases to recover those costs.
He even had language in mind. The next paragraph:
- A cost-recovery provision along the lines of one contained in House Bill 1226, Section 1, would stop the utility from passing along costs to consumers while still directing the appropriate environmental protection. I realize this issue is complicated and that utilities are entitled to reasonable cost recovery in most instances. However, in this situation it is better to come down on the side of the consumer.
The two phrases that stand out here are "reasonable" and "on the side of the consumer." Cooper expressed a view that Duke being granted rate increases to recover the coal-ash cleanup costs would not be reasonable. That word refers to a standard in state law; a utility's costs must be "just and reasonable and prudently incurred"
for the Utilities Commission to allow a rate increase based on them.
Cooper expressed a view that prohibiting such a rate increase would be on the side of consumers.
Here is the bill language Cooper wanted instead. From House Bill 1226 (which did not pass)
- The Commission shall not allow an electric public utility to recover from the retail electric customers any of the following costs:
Costs incurred on or after January 1, 2014, that are related to the management of coal combustion residuals disposed of in coal combustion residuals surface impoundments, including costs associated with complying with the provisions of Part 2I of Article 9 of Chapter 130A of the General Statutes.
Costs incurred on or after January 1, 2014, that are related to an unlawful discharge to the surface waters of the State from a coal combustion residuals surface impoundment, unless the Commission determines the discharge was due to an event of force majeure."
- Costs incurred on or after January 1, 2014, that are related to the management of coal combustion residuals disposed of in coal combustion residuals surface impoundments, including costs associated with complying with the provisions of Part 2I of Article 9 of Chapter 130A of the General Statutes.
- Costs incurred on or after January 1, 2014, that are related to an unlawful discharge to the surface waters of the State from a coal combustion residuals surface impoundment, unless the Commission determines the discharge was due to an event of force majeure."
Cooper's position on protecting consumers from coal-ash cleanup costs made statewide news: see, e.g., coverage by The News & Observer, the Asheville Citizen-Times, and the Hickory Record.
There's no such consumer protection in the settlement agreement between Cooper's DEQ, environmental groups, Duke Energy, and not consumers. The settlement requires full excavation of seven of the nine remaining sites, with partial excavation of the other two, leaving already covered coal ash in place. The settlement agreement specifically includes language for the Utilities Commission to authorize utility rate increases related to the additional coal-ash cleanup costs forced by Cooper's Department of Environmental Quality:
- Stipulations Between Only the Parties to this Agreement Regarding Rate Recovery Proceedings.a.DEQ and the Community Groups agree that closing the CCR impoundments at the Allen, Belews Creek, Cliffside, Marshall, Mayo, and Roxboro Steam Stations in accord with this Agreement (including the obligations imposed by the Consent Order contemplated by this Agreement) is reasonable, prudent, in the public interest, and consistent with law. This subparagraph applies only to the actions of Duke Energy in entering into this Agreement and assuming the obligations under this Agreement. For example, and without limitation, the agreement in this subparagraph does not extend, nor shall it be construed to apply, to the issues of (i) whether Duke Energy acted prudently and reasonably in the past, or (ii) whether Duke Energy prudently and reasonably performs its obligations under this Agreement. Nothing in this Agreement shall be taken as an admission of any imprudent or unreasonable actions by Duke Energy.b. Nothing in this Agreement, including but not limited to subparagraph (a) above, shall be taken as an endorsement or opposition by DEQ or the Community Groups of recovery through rates of the costs incurred by Duke Energy implementing the terms of this Agreement or related Consent Order.c. DEQ and the Community Groups shall not challenge or otherwise object in court or before an administrative body to the reasonableness, prudence, public interest, or legal requirement for Duke Energy to comply with the obligations imposed by this Agreement, related Consent Order, or as to the Agreement itself.
This portends major rate increases on Duke's customers. Duke officials now estimate the cost of coal-ash cleanup to be "approximately $8 billion to $9 billion" over the next 15 to 20 years. That's up significantly from original cost estimates of $5.6 billion.
So ... what happened?
There are many, many questions about the events leading up to this settlement agreement and about its details. Here are only a few.
When did Cooper change his mind about who should bear the burden of cleanup costs? Why?
How can it be unreasonable and unfair to sock consumers with the cleanup costs in 2014, but add extra cleanup costs in 2020 and then it's not a problem?
If the governor no longer considers himself on the side of consumers, shouldn't he at least tell us whose side he's on now?