Duke Energy: Unlined coal ash pits once 'a feature, rather than a flaw'

This rate decision, pending before state regulators, isn't about the 2014 Dan River spill that spewed coal ash downstream, the company said in its brief. Nor is it about the coulda, woulda, shoulda customer advocates have engaged in in an effort to block the increase, Duke Energy Progress attorneys said.

The company complied with existing laws and industry standards when it left wet ash in unlined pits for decades, they said. At one point "the lack of a liner was considered a feature, rather than a flaw" because soil would filter out containments, the company said. Impact on groundwater wasn't initially a concern "because the ash basins were built more than a decade before the adoption of any federal or state regulation related to groundwater corrective action," attorneys argued.

Arguments now that the company should have done more in the past to save customers money now on cleanup rely on hindsight and ignore the fact, Duke attorneys argued, that regulators with the North Carolina Utilities Commission might not have even allowed the utility to go above and beyond on coal ash in recent decades, due to the costs this would have passed on to customers and the lack of legal necessity.

That same commission will decide now whether Duke Energy Progress shareholders or its customers will cover the majority of costs for a cleanup that has since been ordered by changes in state and federal law. Between Duke Energy Progress and its sister company, Duke Energy Carolinas, parent Duke Energy has asked for more than $1 billion a year in increases.

"In short, while intervenors have attempted to portray – falsely – DE Progress as some sort of 'bad actor' undeserving of cost recovery, that portrayal is irrelevant to, and has no part whatsoever in, this case," the company argued.

"They fault the Company for not doing something that no one was doing, but at the same time washing their hands of any responsibility of paying for that which they – in 20/20 hindsight – wish the Company had done," the utility's brief states.

Friday brought a last round of legal arguments from dozens of attorneys involved in Duke Energy Progress' rate review case. In their own filings, consumer advocates with private groups disputed the idea that the company and its predecessors toed the line on industry standards for coal. The Attorney General's Office said in its final brief that the company has "a long history of not meeting" these standards and that it "knowingly maintained its ash impoundments in a state likely to result in environmental contamination."

The Attorney General's Office referenced to a number safety reports, including an inspector who found "open cracks" and other problems in safety features at the H.F. Lee Plant in Goldsboro in 1999. That inspector returned in 2004 to note that "those same problems had not been repaired and still existed," the Attorney General's Office said.

If Duke had been proactive, cleanup costs "would have been far less than the costs are now and will be in the future," the Attorney General's Office said.

The case before regulators now deals only with Duke Energy Progress, which serves Wake County and the eastern half of the state. Duke Energy Carolinas serves the western half, and its rate request will move forward at the Utilities Commission this year.

In addition to coal ash cleanup costs, the companies want to use the added revenue to continue their move from coal to natural gas and to bury power lines and make other upgrades to the electric grid. Some of the money would cover costs of storm cleanups, including Hurricane Matthew.

One of Duke Energy Progress' requests wouldn't increase what people pay per kilowatt hour, but what they pay to be connected to the grid. This increase in the company's monthly basic customer service charge "undermines energy efficiency goals and would shift costs from high-end users to those who must carefully budget their consumption, including low-income and elderly users," the Attorney General's Office argued Friday.

Duke Energy Progress has said the increase would bring the charge closer to covering the actual cost of what it's supposed to represent. It initially asked to boost the charge from $11.13 a month to $19.50 for most residential customers. The utility cut a deal with state regulators to cut that request to $14 a month, but it will be up to the Utilities Commission to make the final call.

The state's Public Staff, a group of accountants and attorneys who represent consumers before the Utilities Commission, signed off on that settlement, but other parties in the case, including Attorney General Josh Stein, did not. The Public Staff also proposed that Duke Energy Progress split coal ash cleanup costs 50-50 with customers, something the company rejected.

Coal ash cleanup costs alone would add nearly $183 million a year to customer bills under Duke Energy Progress' proposal.

The commission also will decide how much return on equity – essentially profit – the energy giant will be allowed over the next few years. The company has agreed to a slight increase, but the Attorney General's Office argues the new rate would be higher than what the company needs to attract investors, which is one of the stated reasons for locking in the rate.

It would be unfair to customers, the Attorney General's Office said in its brief, "to require them to fund such a windfall."

The company also has asked the commission to approve a new subsidy for large industrial customers, which is meant to lower their electricity costs and protect manufacturing jobs. A conglomerate of retailers has opposed this, calling it "a $125 million gamble with ratepayer money that may or may not save a single industrial job."