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For US utilities, coal ash remediation's critical question: Who bears the cost?

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Crews deliver ash to a fully lined on-site landfill at Duke Energy's L.V. Sutton coal plant in North Carolina in July 2017.
Source: Duke Energy Corp.

The National Association of Regulatory Utility Commissioners anticipates tensions will run high among electric utilities, state regulators and environmentalists as they try to negotiate mutually agreeable solutions to manage coal ash.

Over the next two decades, the industry will be digesting the U.S. Environmental Protection Agency's regulations on coal combustion residuals, or CCR, said Maria Seidler and Ken Malloy, two independent consultants hired by NARUC to study the EPA's recent rulemaking and its impact on U.S. public utility commissions. The consultants released a white paper on the issue ahead of NARUC's Winter Policy Summit in Washington, D.C., scheduled to run Feb. 9-12.

Regulators may find themselves between a rock and a hard place as utilities face astronomical costs in pond closures and ash removal across their coal fleet and activist organizations fight attempts to pass those compliance costs onto ratepayers, Malloy said Feb. 6.

"It's a highly contested matter of who will bear the costs of coal ash remediation, which is clearly what the primary interest of the state commissioners is going to be," Malloy said during a presentation discussing the white paper. "Increased tension between desired environmental outcomes and the ultimate costs" will be the key issue as stakeholders work through coal ash cleanup, according to Malloy.

"The state of coal ash is very much a moving target," Seidler added.

The EPA published its CCR rule, which established the first minimum federal safety standards for coal ash, in 2015 to address the problems made evident by the Tennessee Valley Authority's Kingston ash spill in 2008. The federal agency later created a program to give states the option to develop their own coal ash management programs under the Water Infrastructure Improvements for the Nation Act.

The rulemaking has created some disputes for utilities with large coal-fired power plants. Duke Energy Corp. announced Feb. 5 that a North Carolina judge approved its settlement agreement with the state's environmental regulators and watchdog groups for the utility to excavate nearly 80 million tons of coal ash from its remaining ash ponds. Duke Energy unsuccessfully challenged an April 2019 order from the state that mandated the utility fully excavate nine basins at six coal plants in the Carolinas, asserting that to comply would add about $4 billion to $5 billion to its $5.6 billion estimate for ash management.

CCR cleanup costs will have to compete with utilities' other potential investments that may seem more lucrative or beneficial to their business model, Malloy said.

"One of the problems with coal ash is going to be is after you deal with all the coal ash remediation, it's not like you have new generating capacity or new opportunities for generation," he said. "It's a sunk cost that really doesn't benefit current consumers. I think that's going to make it very controversial as utilities consider other priorities."

That said, stakeholders may be overlooking beneficial uses for ash, such as recycling the materials for concrete or electric vehicle batteries, Seidler said. The market to repurpose excavated ash could be an opportunity to help mitigate some of cleanup costs.

"We may actually be forfeiting some value if we don't add the future value of coal ash into our plans," she added.