- A decision over how Duke Energy will pay for its coal ash cleanup could prove "detrimental" to the utility's balance sheet if it is not able to recover those costs through its rate base, Chairman, President and CEO of the company Lynn Good said during the company's fourth quarter earnings call Thursday.
- The utility in January settled with environmentalists on the largest coal ash cleanup in U.S. history, expected to cost $8 billion to $9 billion and remove a total of 124 million tons of ash. Dominion Energy will also have to excavate large amounts of the waste in Virginia, and will be allowed to fully recover its costs, said Good. That order "is a significant outcome which we, of course, believe makes sense given its decommissioning of coal plants that have provided great value to our customers over generations."
- Coal ash costs are not included in Duke's $4 billion capital expenditures increase it expects over the next five years in North Carolina, Executive Vice President and Chief Financial Officer Steve Young said during the call. The company's overall capital expenditures are expected to rise $6 billion over that time period, largely due to successful rate case negotiations in the Carolinas and Midwest.
Duke's two biggest headaches over the next few months will come from its Mid-Atlantic region, according to its Q4 call. In March the utility will begin to make its case for cost recovery on its coal ash settlement to the North Carolina Department of Environmental Quality, and it and others are still waiting on a final decision from the U.S. Supreme Court on Atlantic Coast Pipeline (ACP) permitting.
Coal ash remediaition, in particular the question of who pays, will continue to plague utilities and state regulators across the country as federal regulations remain in flux, according to a January report from the National Association of Regulatory Utility Commissioners.
"[T]here is a fairness issue. It is impractical to try to bill past customers who received the electricity that was generated thereby creating the ponds," one of the report's authors Ken Malloy, executive director of CRISIS and Energy Markets, told Utility Dive in an email. "So, who should now pay even in light of the ‘used and useful' doctrine: ratepayers or shareholders or both?"
Most utilities argue ratepayers should pay.
"There is a cost of financing associated with anything of this nature and that cost of financing should be considered as part of cost of service," said Good during the company's earnings call.
The ACP is another unknown, but an unfavorable ruling would be less detrimental, said Good. In October, the Supreme Court agreed to hear an appeal on a December 2018 rejection of a key permit for the pipeline. Oral arguments are scheduled to begin Feb. 24, but if the appeal fails the utility said it will be able to absorb the loss.
"We will work our way through it … we've taken the step of strengthening our balance sheet to absorb a range of options," said Good. "We have flexibility with our capital plans to make adjustments, to put in a plan B if one is required to build gas infrastructure to meet the needs ACP would have met."
The ACP makes up around 4% of the utility's five year plan, and a decision is expected by June 2020, with construction beginning mid-year, assuming a favorable ruling.