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This is how business works (the really short and oversimplified version): You add up all the costs of doing what you do — labor, utilities, property, transportation, raw materials — and divide by the units sold to arrive at your actual cost. Then you add a percentage of profit and you’ve got your retail price.
As it deals with the excavation and disposal of the coal ash that it has collected around its present and former coal-powered electric plants, Duke Energy proposes using that very formula to pay for the cleanup. Simply put, Duke wants to pass all the cost along to the consumers.
If Duke gets its way, it will charge North Carolina consumers an extra $305 million a year, which amounts to a nearly 10 percent rate hike. At a time when inflation is barely touching 2 percent and wages are still stagnant, that could really hurt, especially for already-struggling low-income customers. It will also hurt a lot of Duke’s big customers, including manufacturers who never fully recovered from the recession and whose profit margins are already razor-thin.
Duke executive David Fountain told the state’s Utilities Commission last Monday that, “We are, for the benefit of our customers, managing our coal ash basin closure in ways that are environmentally compliant. Those are all environmental compliance costs that we’re seeking cost recovery for because those costs were incurred in a reasonable and prudent manner.”
That’s one of the most basic questions for the commission to decide as it considers Duke’s rate request: Is stockpiling enormous amounts of toxic waste in open pits that are often adjacent to major waterways really reasonable and prudent?
And what if those ash impoundments were found leaking — in catastrophic fashion when millions of gallons of ash slurry coated the Dan River in 2014, or on unseen ways when contaminants enter the water table and show up in nearby wells?
Duke knows now that those ash basins can be a significant public health and safety threat. Should its customers have to pay the estimated $2.6 billion that the cleanup will cost when a reasonable and prudent corporate management should have been more vigilant about possible problems long ago?
Most businesses dispose of their waste before it becomes an environmental hazard instead of storing it on-site for decades. Should the consumers bail out Duke’s dubious bet on the safety of that practice? Or should the shareholders of the country’s biggest utility take responsibility for some of that expense?
Yes, Duke did follow the state and federal coal-ash regulations that were in effect at the time — regulations that also ignored the possibility of catastrophic spills and the toxic nature of the ash. It wasn’t until a massive 2008 ash spill from a Tennessee Valley Authority ash-storage pond that anyone realized the potential danger of large-scale ash storage and the need to keep the ash away from public water supplies.
But still, there was little change in industry regulation until after the Eden spill, when state and federal officials realized that the TVA spill wasn’t an anomaly. Duke doesn’t appear to have changed its coal ash management strategy after the TVA spill, save perhaps for crossing its corporate fingers and hoping the same thing doesn’t happen here.
Well, it did, and now the company is doing the right thing, moving the ash from many of the basins to safer storage sites, and in some cases, even recycling it into building materials. The company is doing the right thing with the ash, but it’s not so clear that it’s doing the right thing by billing its customers for that expense.
The state’s utility regulators have generally done a good job of keeping rate hikes down and negotiating rate requests with utilities. In fact, even before the hearings began, state officials persuaded Duke to cut the size of the rate hike request.
We hope the commission will trim it considerably more. We’ll accept Duke’s argument that consumers and business have benefited for decades from cheap electric rates. But we don’t buy the utility’s belief that consumers should foot the entire bill for moving all that coal ash. At some point, companies have to take responsibility for their own decisions.