Duke Energy customers will likely pay most of the cost to clean up the utility's 14 coal ash ponds in North Carolina. That means electric rates would increase to cover the $2 billion to $10 billion price tag.
The utility says it will pay for the coal ash spill that occurred at the Dan River site in Eden earlier this year, but Duke Energy North Carolina president Paul Newton and its CEO, Lynn Good, have indicated that they expect consumers to bear the financial burden of cleaning up the other coal ash sites around the state.
Yet, while Duke Energy failed to address its coal ash problem, the utility's market value has reached $50 billion. It posted total profits of $9 billion from 2008 to 2012. Duke paid no federal income taxes during that time, deferring them to future decades by taking advantage of provisions in the 2009 stimulus package.
"Duke Energy made major errors in not dealing with the coal ash issue years ago," state Rep. Paul Luebke, D-Durham, told the INDY. "The public shouldn't have to pay for it now, when Duke Energy did not work to clean up the mess back then. Waiting all these years has meant cost of the cleanup is much greater."
The overall financial responsibility could be decided by legislators in the upcoming General Assembly short session, which starts May 14. However, the amount Duke Energy customers pay will be determined by the North Carolina Utilities Commission, a regulatory board stacked with commissioners who have substantial ties to the utility industry.
As the INDY reported last year, the regulatory board includes three recent Pat McCrory appointees (see box, page 17). And the commission's public staff, charged with representing the best interests of consumers, is led by a lawyer who represented large utilities at his former firms.
Chris Ayers is the executive director of the North Carolina Utilities Commission Public Staff, a 74-member investigative body that evaluates the utility's cost decisions. The Public Staff makes recommendations and appears as a witness before the Utilities Commission in its rate case proceedings, using its own attorneys to cross-examine utilities on their expenditures.
Last Tuesday, Ayers and NCUC Chairman Ed Finley Jr. explained the separate roles of the Utilities Commission and the Utilities Commission Public Staff to lawmakers on the Environmental Review Commission.
"We essentially are the eyes, ears and voice of customers that are served by investor-owned utilities such as Duke Energy," Ayers said. "The public staff is guided by an overarching principle that rates must be just and reasonable."
But Ayers has spent most of his career working on behalf of utilities, not citizens. He worked at the Raleigh-based Hunton & Williams law firm (alongside Utilities Commission Chairman Finley) for six years before moving on to work as a partner at Poyner & Spruill, in 2009. Both firms have extensive ties to private utilities companies. Hunton & Williams lobbies on behalf of utilities companies, including Duke Energy, and it represented Progress Energy in 2012 merger negotiations with Duke.
Ayers worked on Duke Energy's behalf during that merger. He also worked as campaign treasurer for conservative state senator Chad Barefoot, R-Wake, during his 2012 campaign.
Unsurprisingly, Ayer's appointment by Gov. McCrory last April caused considerable controversy, with Democrats in both chambers of the General Assembly seeking to block his confirmation. Rep. Luebke fiercely opposed Ayers' appointment.
"I raised questions whether someone like him who had worked not as an employee but as an attorney on behalf of Duke, whether such a person could represent the public fairly," Luebke said. "My feeling was we all would be better off with a director who was not formerly doing work for Duke Energy. That way we would be more assured of independence."
Upon receiving Ayers' financial disclosure to the North Carolina State Ethics Commission in May 2013, the Commission wrote a letter to Gov. Pat McCrory that Ayers "has the potential for a conflict of interest and should exercise appropriate caution in the performance of his public duties should Poyner & Spruill or his clients come before him for official action."
Ayers says he has recused himself from any case he has been involved with where there might be a conflict of interest and that he will continue to do so. He says he does not see his role with the public staff in vetting Duke Energy's spending decisions as a conflict of interest.
"If some people have expressed that, then so be it," Ayers said. "We have a very professional staff here and we are quite serious about looking out for the best interest of consumers. Our legislative mandate is clear, which is to look out for the using and consuming public which is the Duke utility and Progress utility ratepayers."
Rep. Pricey Harrison, D-Guilford, said last week's presentation sent the message that Duke Energy will try to inflate the cleanup cost, even though the company is only pushing to cap coal ash ponds—the cheapest and most lax cleanup option.
She said that Duke and DENR are downplaying the risks involved with toxic coal ash, including the documented cancer clusters among people who live around coal ash sites.
Data collected by the EPA found that people living near coal ash waste ponds have as high as a 1 in 50 chance of developing cancer after exposure to drinking water contaminated with arsenic, a toxic coal ash pollutant. The odds increase for people who get their drinking water from wells and who live near unlined, wet coal ash ponds that contain other related waste; nearly all of Duke Energy's coal ash ponds in North Carolina meet this description.
"Duke has been violating the Clean Water Act for decades, and they have pushed back attempts to more safely manage coal ash for years," Harrison said. "They know it's been an issue and they fought attempts to regulate it, so shareholders should bear the cost burden and not the ratepayers."
Duke Energy communications officer Erin Culbert said the EPA study was "flawed in a number of ways" and that groundwater "flows downhill from ash basins and away from neighbors. We are proactive in ensuring public and private drinking water supplies are well-protected," she wrote. ""We have no indication of any off-site groundwater impacts that would pose a health concern for neighbors." She added that Duke Energy's monitoring program keeps regulators informed of changes and the majority of coal ash is "already being managed."
Amy Adams, a former regional officer for DENR, says that both Duke Energy and the agency have known since the 1990s there was groundwater contamination at all of the coal ash ponds; neither did anything to address the issue.
"They could have initiated action then," Adams said. "Even as recently as 2008 with the Kingston spill and the whole nation alerted to the problem of coal ash, we knew we had contamination at all 14 sites. It's a failure to plan ahead and have a long term vision until they are in crisis mode."
Gabe Elsner, executive director of the Energy & Policy Institute, a Washington, D.C.0based research and clean energy advocacy group, said the fact that the utilities commission and public staff presented before a legislative commission at all is "concerning" and that the spill and ensuing debate is evidence that states need to move beyond coal and embrace clean energy.
"Duke Energy is a powerful political player and they'll do anything to maximize their profits at the expense of ratepayers," Elsner said. "We need the commission and the public staff to be advocates for ratepayers and the public."
Chief Counsel of the Public Staff Tony Wike said it would not be appropriate to speculate about how customers' rates could be impacted by cleanup costs, as there are currently too many unknown variables.
Luebke said that while he believes whether Duke could have done more about coal ash pollution in the past is something the Public Staff should evaluate, he doesn't know where Ayers will come down on the issue.
"Mr. Ayers is executive director now and the question will be how strongly the Public Staff will represent the public," he said.
Potential Conflicts of Interest on the N.C. Utilities Commission
Chairman Edward Finley Jr.
Appointed and re-appointed under the Gov. Easley and Gov. Perdue administrations, Finley worked as a lawyer for 27 years. Before he was appointed to the NCUC, he was partner at Hunton & Williams, where he represented many of the utilities companies he now regulates. Finley wrote in a Statement of Economic Interest before the State Ethics Commission, "For several former clients, it will be necessary to refrain from participating in cases in which they are parties for a finite period of time." Finley's term expires June 2019.
A McCrory appointee, Bailey worked as an energy engineer at ATI Allvac, a company that manufactures heavy equipment for utilities, including turbines for the coal, oil and natural gas industries. He was also formerly a regional engineer at DENR. His term expires June 2017.
Another McCrory appointee and former state representative, Dockham was a member of the American Legislative Exchange Council, a lobbying group that has various utilities corporations—like Duke Energy—as members. ALEC has been behind recent efforts to roll back state and federal clean energy standards.
The third McCrory appointee on the commission, Patterson worked as a public relations professional on behalf of several big utilities. Webb Patterson, the public relations firm he founded, which was later rebranded as Patterson Partners, included Carolina Power & Light (a Progress Energy subsidiary) on its client list from 2004-2009. Patterson was also President of B&C Associates which currently lists Duke Energy as a client.
This article appeared in print with the headline "Why Should You Pay For Duke Energy's Coal Ash Cleanup?."