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Alabama Power hikes rates 3% to cover costs tied to water intake, coal ash rules

Alabama Power Co. implemented an electric rate increase of about 3%, most of which will go to cover more than $200 million in compliance costs largely related to closing coal ash basins in the state. The Southern Co. subsidiary's rate hike went into effect Jan. 1, impacting about 1.4 million customers, a company spokesperson confirmed.

The average residential ratepayer's bill is expected to increase by $4.49 per month, Alabama Power's Michael Sznajderman said Jan. 7. The "vast majority" of the cost increase is due to the U.S. Environmental Protection Agency's coal combustion residuals, or CCR, rule and water intake rule for power plants, he explained.

Finalized in 2014, the water intake rule allows power plant owners/operators to choose from a variety of technologies to reduce the number of fish and other aquatic life killed by cooling water intake pipes. The CCR rule, finalized in 2015, established minimum federal requirements for the safe handling and storage of coal residuals, a byproduct of burning the fossil fuel for electricity.

Coal-fired power plant operators generally dispose of ash and other coal residuals by dumping it into dry landfills or mixing it with water and channeling it into wet surface impoundments known as basins. The problem is that those basins are at risk of structural failure and can contaminate the underlying soil and groundwater with hazardous pollutants.

In response to the CCR rule, Alabama Power unveiled a plan in 2016 to shut down 12 coal ash basins at six of its generation facilities to comply with the regulations. In March 2018, the utility reported new information through filings required by the rule showing groundwater contamination at numerous coal ash storage sites. Around the same time, the Alabama Department of Environmental Management proposed to fine Alabama Power $1.25 million for violations at five of the utility's coal ash storage facilities.

Alabama Power is waiting on permits from that department to proceed with a plan to close five remaining coal ash basins by capping the ash in place, Sznajderman said. The storage sites will stop receiving coal ash sometime in the first quarter, he said.

Under the CCR rule, a basin can be closed by excavating the coal ash, which can be a costly and time-consuming process, or by draining the water and capping the ash in place if certain criteria are met. Environmental groups have argued that fully excavating unlined coal ash basins is the only way to ensure that underlying groundwater is not polluted, but utilities have contended that capping the basins can be done safely. Alabama Power also is in the midst of installing new water treatment equipment to comply with the EPA's water intake rule, Sznajderman said.

Details surrounding Alabama Power's rate increase were discussed at a Dec. 10, 2018, public meeting held before the Alabama Public Service Commission. Although ratepayers will pay more for environmental costs, the utility's base rate will remain flat in 2019 following a moratorium on increases that runs through 2020, Sznajderman said. Customers also will benefit in 2019 from a $50 million credit related to the federal tax reform law passed in late 2017, he noted.