Coal ash questions won't be answered for years

by Tom Campbell, Executive Producer and Moderator, NC SPIN, August 29, 2014.

Before legislators could adjourn for the year they had to do two things: give teachers a pay raise and pass a coal ash cleanup bill. Most agree their coal ash solution was weak, leaving more questions than answers. Among them are who will pay for the cleanup, whether the commission created to oversee cleanup is constitutional and what will be done with the ash once it is removed from current sites.

Governor Pat McCrory spoke to many of those issues in an NC SPIN interview last week. McCrory questions why the legislature would house this cleanup commission in the Department of Public Safety instead of the traditional Department of Environment and Natural Resources. He further questions the constitutionality of the legislature appointing two-thirds of the members of this commission, an action he believes breaches the separation of powers clause in our constitution.

Every customer wants the lights to come on when they throw the switch and they also want to pay the least amount possible. The question on most minds is who will pay for the cleanup. Neither the governor nor the legislature appear willing to stake themselves out, perhaps because both must face the voters, legislators in November and McCrory in 2016. A recent poll reports an overwhelming majority of Duke customers don’t think they should pay the cleanup costs. We suspect Duke’s shareholders don’t want to either. But someone must stand for the estimated $10 billion expense.

The legislature left town without a solution, saying they got as far as they could get agreement. Governor McCrory deferred to the State Utilities Commission, correctly saying they are the body with the authority to set electric rates so they should make the decision.

By law regulated utilities are allowed to earn a reasonable return (profit) on their investments and services through set rates that are periodically adjusted based on costs of fuel, operations and capital investments. No doubt the commission will acknowledge that Duke and other utilities have historically kept electric generation costs low by using the cheapest fuel possible, most often coal. Had the public utility companies been required to more stringently protect the environment and cleanup the ash residue, as is now demanded, the increased operating costs would have been passed along to customers through higher rates. Ratepayers have benefitted from the lower costs.

Since the Utilities Commissioners are appointees, not elected politicians, we think it a safe bet they will not rule that shareholders are totally liable for all the cleanup costs, but neither will they ascribe costs totally to customers. We predict they will conclude both shareholders and ratepayers should pay the costs through some algebraic formula.

Then the politics will kick in. Ratepayers don’t think they should pay any of the costs and if they believe they shoulder too much of the burden they will fill the ears and mail boxes of their elected representatives, demanding legislative relief. Lawmakers, being politicians, are likely to respond.

Coal ash cleanup is a trial lawyer’s dream come true; lawsuits will likely take years to resolve. And don’t forget there is a federal criminal investigation on the issue underway. Someone will pay for all of this. But at least our legislators can return home boasting they passed “historic,” albeit inadequate, legislation.