NC regulator: Can Duke Energy charge all coal ash costs?

Charging North Carolina consumers the full, multibillion-dollar cost of cleaning up coal ash dumps is comparable to tire stores charging customers an extra fee to dispose of an old set of wheels, a Duke Energy Corp. executive said Monday.

Duke Energy Progress, the corporation's eastern North Carolina operating subsidiary, is simply passing along clean-up costs that regulators have dictated, and shouldn't have to ding shareholders for a chunk of the $2.6 billion bill as consumer advocates want, executive David Fountain said.

It's the main issue as the subsidiary opened days of hearings into whether the North Carolina Utilities Commission will allow it to raise power rates by an average 9.5 percent, charging its North Carolina consumers an extra $305 million a year.

The state's official utilities consumer advocate, the Public Staff, thinks the company shouldn't pass along nearly $200 million a year to clean up decades worth of potentially toxic coal ash. The request has met stiff consumer opposition.

Duke Energy argues both of its North Carolina subsidiaries should be allowed to pass along the full bill for coal ash cleanup to consumers as part of the routine cost tied to burning coal to deliver low-cost electricity.

"We are, for the benefit of our customers, managing our coal ash basin closure in ways that are environmentally compliant," said Fountain, Duke Energy Progress's president. "Those are all environmental compliance costs that we're seeking cost recovery for because those costs were incurred in a reasonable and prudent manner."

But a lawyer representing manufacturing companies that are heavy electricity users said Fountain's comparison breaks down because the company wants to charge customers now for a problem that's built up over generations.

"The tire company is not going to accumulate 40, 60, 100 years worth of tires before they do something about recycling it," attorney Robert Page said. "The tire company is not going to allow those used tires to stack up and up and up and up before it gets those used tires off of its property."

The hearing comes after the company and the Public Staff last week struck a partial deal reducing the company's requested rate increase from an average of almost 15 percent. Households would pay an extra 11.4 percent if the utilities commission approves the modified Duke Energy request, down from 16.7 percent proposed in June. The company also agreed to cut its requested potential profit margin to below 10 percent.

The deal included Duke Energy Progress charging its 1.3 million customers less for corporate aviation, lobbying and board of directors costs. Duke Energy also agreed to seek less compensation for its now-reversed plans to add to a nuclear plant near Raleigh, and to swallow more industrial revenues lost because of Hurricane Matthew last year.

The company plans to excavate coal ash and move it away from waterways at eight of the 14 North Carolina sites. Ash would be dried out, covered and left in place at the other waste pits. Coal ash contains arsenic, lead, mercury and other elements that may be hazardous in sufficient concentrations. Environmentalists and state regulators say those heavy metals have been draining through the unlined bottoms of pits where liquefied coal ash has been stored for decades.

Duke Energy Progress last sought a rate hike in 2012, the first time in two decades that the company or its predecessor sought an increase. The company wants an average 14 percent increase for households and 9 percent for commercial and industrial customers. The utilities commission approved and the state Supreme Court allowed an average 5 percent increase.

The company's western North Carolina subsidiary, Duke Energy Carolinas, is seeking a separate 17 percent increase on households that also includes coal ash costs. The utilities commission will hold hearings into that request early next year.

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