[Editor’s note: The North Carolina Justice Center (parent organization of NC Policy Watch) is one of several nonprofit intervenors represented in the Duke Energy Progress rate case by the Southern Environmental Law Center. As a journalism outlet, NC Policy Watch isn’t involved in these proceedings beyond its newsgathering and commentary responsibilities.]
The Dobbs Building hearing room was so stuffed with dark suits and shiny calfskin shoes that it resembled a Brooks Brothers warehouse.
“Are there any North Carolina lawyers who aren’t here?” asked Ed Finley, chairman of the NC Utilities Commission, as he prepared to preside over what is predicted to be a two-week slog: the Duke Energy Progress rate case.
Duke Energy Progress (DEP), whose service territory includes 170,000 miles of transmission lines in North Carolina is asking the commission to approve a nine percent overall rate hike, which includes an 11.7 percent increase for residential customers. The service area includes the cities of Asheville, Raleigh and Wilmington.
That increase equates to about $13 on a typical household electric bill. The additional revenue, DEP says, would pay for, among other investments, solar energy projects, new natural gas plants, and technology to help customers manage their energy usage.
However, what makes this rate case hearing more contentious than usual — rarely does any increase go unchallenged — is that DEP wants to shift the $200 million burden of cleaning up its coal ash sites from the company and its shareholders to its customers. It’s possible that amount could include the cost of providing bottled water to private well owners affected by groundwater contamination from leaking coal ash impoundments.
The commission’s public staff, which represents the ratepayers, and a battalion of intervenors in the case adamantly oppose the proposal. Even, however, after the public staff relented, agreeing in closed-door negotiations that customers could split the cost with the utility, DEP refused to budge.
Duke officials claim a change in environmental laws triggered the utility’s request for coal ash-related cost recovery. In 2014, the EPA adopted its Coal Combustion Rule, which served as a template for the state’s Coal Ash Management Act (CAMA). (Note: In response to an industry request, the EPA is reconsidering portions of the federal rule.)
Roughly $19 million of DEP’s request is related to complying with state CAMA rules. Those regulations and subsequent legislation govern the disposal of coal ash, basin closure plans, reporting, recordkeeping groundwater assessment and the provision of alternative water supplies to affected households. Some homes in Duke Energy Carolinas territory have been receiving bottled water for more than 925 days.
Duke could argue that since providing bottled water or other alternative sources, such as filtration systems, is part of “environmental compliance,” the utility should be able to recover those costs.
Duke Energy, though, knew what was on the horizon in CAMA. The utility’s lobbyists, among the most powerful on Jones Street, and its political action committee, which gave $108,000 in campaign contributions, presumably influenced the CAMA’s provisions.
“What was Duke Energy trying to get out of contributing to the candidates’ campaigns?” asked attorney John Runkle, representing NC WARN.
In response, DEP President David Fountain said that “there are a variety of political dynamics and we wanted to ensure [legislators] heard balanced points of view.”
DEP contends that its request doesn’t run afoul of another law, the Public Utilities Act. Under that statute, utilities can’t recover money from ratepayers for expenses incurred as result of unlawful discharge. The coal ash impoundments, which for years have leaked contamination into the groundwater — even after closure, some continue to seep — have done just that: unlawfully discharged.
(The February 2014 disaster in which thousands of tons of coal ash were discharged into the Dan River occurred in the Duke Energy Carolinas territory and is not part of this rate case.)
But customers wouldn’t be covering the tab for Duke’s unlawful discharges, testified Fountain. Rather they’d be paying for “environmental compliance,” akin to “a tire shop assessing an environmental disposal fee.”
“A tire shop is not going to accumulate 50 to 100 years’ worth of tires before disposing of them,” countered attorney Robert Page, in his cross-examination of Fountain. “When you recycle a battery or a tire, it’s likely been purchased within the last five years. The costs for coal ash were accrued 40, 60, 80 years ago. You consider that fair?”
In other words, when the textile mills of yore stoked their boilers with coal, future generations were unknowingly on the hook for its storage and disposal.
It would have been untenable to charge customers 50 years ago “for future changes in environmental regulations,” testified Duke Energy’s Director of Rates and Regulatory Strategy Laura Bateman.
Yet, utilities employ similar tactics today. In fact, it’s the companies’ job to forecast and respond to shifts in the regulatory landscape. As energy companies anticipated tighter restrictions on carbon dioxide emissions, for example they began switching to natural gas. If the proposed Atlantic Coast Pipeline is approved, today’s customers will pay higher rates to help subsidize a $5.5 billion project, even if it isn’t completed until well into the future.
“The cost is permitted to be recovered by fact, law and precedent,” Fountain said, a point he repeated throughout the afternoon. “I do think that customers who enjoy the benefits of coal energy should have to bear some costs.”
The Duke Energy Progress rate case is expected to last as long as two weeks. After the parties have finished their arguments, the seven-member Utilities Commission will deliberate and then announce the rate increase that they have approved.
Then in January, public hearings will begin on the Duke Energy Carolinas rate case. The utility is asking for a 17 percent increase for residential customers and 11 percent for industrial and commercial ratepayers. A portion of that revenue would also go toward cleaning up coal ash basins.
However, the composition of the commission is in flux, and it’s uncertain who will participate in final decision-making. The terms of Commissioner Bryan Beatty and ToNola Brown-Bland expired in June. Gov. Roy Cooper reappointed Brown-Bland, but lawmakers have not approved it yet. Likewise, Cooper appointed Charlotte Mitchell to replace Beatty, but her tenure has also been delayed by legislative inaction. Only Dan Clodfelter, Cooper’s third nominee, was approved by the General Assembly.