Eat My (Coal) Dust!

Possum Point coal ash ponds

In a possible early-warning sign of what may be in store for Virginia electricity consumers, North Carolina regulators have decided that Duke Energy could charge their Tarheel rate payers the first $778 million chunk of an estimated $5 billion in coal-ash cleanup costs. The sum does not include $100 million in two mismanagement penalties for practices that “resulted in cost increases greater than those necessary to adequately maintain and operate its facilities,” reports the Associated Press.

Dominion Energy Virginia will likely incur coal-ash disposals costs in the $1 billion to $4 billion range, although no firm figure will be available until the state issues solid-waste permits for a disposal plan. Dominion says that de-watering the coal ash, consolidating the material in a single pit at each power plant, and covering it with a synthetic liner will protect the public at a fraction of the cost of the alternative, favored by activist groups, of hauling the ash to landfills with greater environmental protections.

North Carolina’s Attorney General said he would go to court to stop Duke from passing along its disposal costs to rate payers. “This case will ultimately be decided by the North Carolina Supreme Court,” he said.

The coal-ash disputes in North Carolina could prefigure in part what happens in Virginia. State regulators must approve disposal plans for millions of tons of coal ash that accumulated legally over the decades at Dominion’s Bremo, Possum Point, Chesterfield, and Chesapeake power plants. Presumably, Dominion will file with the State Corporation Commission (SCC) to pass along as much of that cost as possible to ratepayers.

What makes Dominion’s situation different from Duke’s is that Dominion’s base electric rates were frozen between 2015 and 2018, and Dominion has already written off a portion of disposal costs incurred during that period. Also, under terms of recently enacted grid-modernization legislation, Dominion now will plow surplus earnings into renewable-energy, energy-efficiency and grid-upgrade projects. The public has not yet been informed how multi-billion charges for coal ash-disposal costs would be treated from an accounting viewpoint, what impact they would have on Dominion profits, or how the costs would ripple through to grid modernization.

I cannot foresee any circumstances in which the SCC would dun Dominion for mismanagement penalties. The company has complied with state and federal laws and regulations as well as judicial rulings throughout the process.

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8 responses to “Eat My (Coal) Dust!”

  1. LarrytheG Avatar

    The excess profits should have gone to the coal ash cleanup – first – as a priority. Choosing to use it for something else then asking where the money for
    the cleanup will come from does not make good sense.

    Most Virginians do not generally trust Dominion or for that matter, any waste-producing industry to pick the “best” method to clean-up as they have a long history of coming up short on what they say will work.

    Even highly-regulated and high-standard landfills with liners and caps – will eventually fail. Most are not expected to last more than a 100 years or so.

    So this is not about “fixing” the problem with the lowest cost “solution”. It’s a little like other hazardous waste which is expected to last for hundreds of years and what will be done when the caps eventually do fail. Is there a bonded reserve fund to deal with these longer-terms eventualities or does Dominion want to get the easiest, cheapest way they can get the State to take responsibility and they exit theirs?

    I don’t blame Dominion for creating the waste. They used the same existing technologies as other generators and in the end – we are the ones who actually did create the waste – just like we create the nuclear waste from North Anna.

    Dominion is not completely blameless. They typically do what any other company will do… try to get the govt to approve the methods that create the waste and try to get the govt to no hold them financially responsible for the cleanup either. We have thousands of sites all over the country – Superfund and others where the Govt (taxpayers) ended up paying for corporate decisions
    on how to deal with pollution and waste.

    We taxpayers are ultimately going to end up with responsibility for the coal ash also – longer term – so it makes sense to do it right now even if more costly – so that we have lower costs downstream. Corporate folks don’t think that way; it’s all about avoiding costs now – and later. It’s responsibility is to it’s investors, ot taxpayers.

    Those excess profits do not belong to Dominion nor it’s investors nor do they own the decision as to the best use of that money – that’s ratepayer and taxpayer money and decisions and my bet is that if you took a poll as to how to
    spend that money – a significant percentage of ratepayers and taxpayers would want it to pay for a proper cleanup.

  2. Acbar Avatar

    Larry, the key words are your last: “a proper cleanup.” What is proper under the circumstances, burial on-site or hauling the dust away to another site? Makes a huge difference in the cost.

    In fairness to Dominion, when it built those coal plants, and later when it added the scrubbers to trap all that particulate matter in the plants’ emissions, its cost analysis to build the kind of plant it did, approved by the SCC in every case, assumed that the coal dust would be buried on site in the existing locations in compliance with all then existing laws and regulations. So what we are facing is the result of a change in the standard of care. That reflects no malfeasance by Dominion, and so the case for sticking the extra cost of hauling the ash away on Dominion’s shareholders (rather than ratepayers) is very weak, notwithstanding the NC Atty Genl’s rant.

    But you raise a very interesting point about the “rate freeze.” A rate freeze cuts both ways. It prevents rates from being lowered even when costs drop — and it prevents rates from being raised even when sudden new costs arise. The exception, of course, would be if the new costs in this instance — hauling away the coal ash — are somehow covered by one of those Riders that automatically adjust for it. Also, Dominion could drag its feet on the relocation of the ash until that triennial rate adjustment comes around — or at least, until the test year which will form the basis for that adjustment.

    As for your speculation that “a significant percentage of ratepayers and taxpayers” would want the ash cleanup costs incurred before system upgrades — consider the tradeoff you are assuming when you make that statement. Coal ash cleanup is a generation cost. System upgrades are a transmission or distribution cost. In electric utilities where these functions have been unbundled, the costs of each function are kept separate. But Dominion knows it stands little chance of making enough money from its generation subsidiary to pay for all that coal ash relocation and disposal — is anyone surprised that Dominion has gone out of its way to keep these generating units in rate base (thereby keeping cleanup costs at ratepayer expense) — rather than making its generation division operate as an unregulated, unsubsidized independent generation owner in the competitive wholesale marketplace?

    Similarly, is anyone surprised that Dominion is building its new natural gas fired generation at ratepayer expense, leaving the ratepayers exposed to all the risk of obsolescence as the Grid evolves away from fossil fuels? The SCC, and more importantly the GA, should not allow this.

    Meanwhile, the SCC and all ratepayers should expect Dominion to maintain the quality of its part of the grid at ratepayer expense as a matter of course, without any special set-asides of funds. Grid upgrades are not “special,” but something the utility should do in the ordinary course of business.

  3. Peter Galuszka Avatar
    Peter Galuszka

    I don’t follow the logic here. New requirements come up on safety and public health and we are supposed to boo-hoo the utility for having to pay. Gee that’s tough. I agree with Larry. Excess profits could go to help pay for this. Plus, as I have written about, Dominion is not big into recycling coal ash into cinder block and wall board. Too expensive, they say. But recycling ain’t exactly new — been around for 50 plus years- maybe much more.

    1. djrippert Avatar

      Agreed. This happens to truly public enterprises all the time. For example, not long ago it was determined that some of the materials used to make computers were extremely toxic. Chromium, beryllium, etc. The federal response was pretty weak but 27 states and DC passed electronic recycling legislation which generally required the manufacturers of the equipment to collect and recycle their equipment. Nobody insisted that this sensible regulatory change be implemented in a way that was guaranteed to avoid lowering the profits of computer and computer peripheral manufacturers.

      I’m sure some will say that regulated utilities are different from competitive electronic equipment manufacturers. Since the state determines what the utilities can charge they have to be protected from unfunded mandates that impact the profits of their investors. I could agree with that if there were substantial caps on the compensation of the executives in those organizations. Why should an executive in a company protected from free market forces and afforded guarantees of shareholder profits be paid at the same rate as those executives who have to work in the real free market? Here’s a look at the 5 highest paid Dominion executives … wow ….

  4. vaconsumeradvocate Avatar

    Why always call those who have a different idea activists or worse? Why not just refer to them as community groups? They may or may not be activists, especially in the negative way inferred here.

    The situation is that there are two different perspectives. The company wants to pass the costs to the rate payers and to do the easiest thing possible, without considering long term consequences. Our world is so focused on the here and now that it fails to consider how our actions will affect the future. We have many situations today where we are having to clean up things that were accepted practice in the past and the longer we put off doing the right thing the more it costs and the more permanent damage exists. Ask folks in Buckingham county who are still dealing with the EPA over the local landfill that a good man installed using the required standards. Among other things, waste from the Appomattox Thomasville Furniture Plant were disposed of there. For too long we’ve allowed big business to walk away from its negative externalities. That’s the crux of the issue. Will we pay today or make our grandchildren pay?

    1. djrippert Avatar

      “For too long we’ve allowed big business to walk away from its negative externalities. That’s the crux of the issue. Will we pay today or make our grandchildren pay?”

      And our grandchildren will pay a lot more trying to clean up years of ecological disasters than would have been paid had these issues been dealt with as they occurred. This reminds me of an episode of “Hoarders” on TV. Continuing neglect of basic housekeeping creates a situation that not only requires industrial efforts to clean up but can even render the house unlivable after the clean up.

      Dominion knew what was building up in those ridiculous coal ask piles next to the rivers. They could have dealt with the problem as the coal ash was created. I am very confident that the present value of dealing with the coal ash as it was produced would be lower than the cost of today’s massive cleanup. Why should the ratepayers be responsible for the difference in cost between ongoing cleanup and one huge cleanup? Shareholders, not ratepayers, get to elect the Board of Directors and have a say in the executives who run Dominion. If those executives chose to look the other way at an obvious and growing problem for the last 30 years it’s the shareholders who should fund the costs of that incompetence.

  5. Steve Haner Avatar
    Steve Haner

    They can stick the costs of the coal ash clean up in a stand-alone environmental compliance “rate adjustment charge/RAC” at any time and pass the entire cost on to ratepayers, rate freeze or no rate freeze. They have apparently “written off” some costs to date, but if a major and more expensive change in the containment plan is coming we as ratepayers will eat it.

    1. Acbar Avatar

      Surprise! It’s a rate freeze, except when it’s not.

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