A Friday ruling from the North Carolina Supreme Court could have state regulators partially rethink who will pay for Duke Energy's cleanup, estimated by the utility to cost $8-9 billion.
Duke and its shareholders will not have to bear the full brunt of the cleanup costs, the court ruled, upholding in part regulators' initial ruling that was challenged by the state's attorney general. But the court also found the commission erred in its rejection of North Carolina Public Staff's "equitable sharing" proposal that would split the cost of cleanup between ratepayers and shareholders and extend the timeline for paying off the costs, while not allowing the utility to profit from the cleanup.
The court's ruling does not mean the North Carolina Utilities Commission (NCUC) has to implement public staff's proposal, however, only that the regulatory body needs to consider "all potentially relevant facts," including alleged environmental violations.
Friday's ruling marked a rejection of environmentalists' argument that the utility should have to absorb the full costs of cleaning up its waste, but still leaves open the question of who will pay to excavate a total of 124 million pounds of coal ash from Duke's coal plant sites.
Ratepayers will pay at least half the costs, but whether the rest will be split by shareholders is still to be seen.
"The worst case scenario for Duke appears to be off the table," said Dave Rogers, southeast deputy regional director for the Sierra Club's Beyond Coal campaign.
Duke made its fears of this scenario known periodically throughout the past year, following its historic settlement with environmental groups in January that requires the utility to excavate the majority of its coal ash pits over the next 10 to 15 years. Utility executives repeatedly told analysts that absorbing those costs would likely weaken its balance sheet, and its CEO said the company would be unwilling to reach a settlement with environmentalists on whether the utility can recover and profit from cleanup costs.
Duke said it was largely "pleased" with the state Supreme Court's decision, calling it a "positive step forward," in a statement. On the court's remand of Public Staff's equity proposal back to the commission, the utility said it was confident that regulators would rule in its favor.
"We continue to agree with the commission's rejection of the Public Staff's cost-sharing approach in several previous rate case orders, and we look forward to the commission providing more details regarding the basis for its decision on the single issue remanded to it, pursuant to the court's opinion," Duke said.
But the commission's makeup has changed significantly since Duke's rate case filing was approved by regulators in 2018, and there's a chance that may not bode favorably for the utility, said Rogers. Just three of the NCUC's current seven officials were members of the commission when those rate hikes were approved, and two of those commissioners dissented on final order. Earlier this year, the commission ruled that Dominion Energy could not earn a return on its coal ash cleanup costs, something analysts have said could be replicated for Duke.
North Carolina Attorney General Josh Stein called the ruling "a major win for electricity consumers on coal ash cleanup costs," despite not knowing how the commission will ultimately rule. Environmentalists are "disappointed" the North Carolina Supreme Court eliminated the option of Duke having to pay for the full cleanup, but hope the commission does not load all of it off onto ratepayers.
"There are people who are going to be paying for this coal ash issue who don't live in the state currently, and potentially, depending on how long it takes to clean it up, might not even be born yet," said Rogers. "So I do hope that both the North Carolina commission and … commissions all across the country really consider holding the company accountable for some portion of this."