Dive Brief:

• Duke Energy announced a settlement with the North Carolina Attorney General, North Carolina Utilities Commission Public Staff and the Sierra Club on Monday that could resolve how the utility will pay to clean up its coal ash.

• The proposed settlement, filed with the North Carolina Utilities Commission (NCUC) on Monday, details how the utility will allocate the costs of its coal ash clean up, and will reduce expenses by about $1.1 billion over the next 10 years, compared to the previous plan. It will also allow the utility to earn a return on equity off the cost of the cleanup, but at a lower rate than it had originally proposed.

• The filing follows a decision from the North Carolina Supreme Court in December that ruled Duke would not be on the hook for the full cleanup costs, but directed the NCUC to review again a proposal from Public Staff that would block the utility from profiting off the cleanup.

Dive Insight:

Duke has estimated its cleanup plan could cost $8-9 billion, and warned shareholders repeatedly that not being able to recover those costs could weaken its balance sheet. The state's attorney general and public staff, along with environmentalists, opposed the utility's plan to recover costs, arguing that the utility should be held accountable for its past handling of the waste.

However, the North Carolina Supreme Court's decision determined that utilities would not have to pay the full cost of recovery, eliminating Duke's "worst case scenario," according to environmentalists. The court instead directed the NCUC to reexamine a proposal from public staff that would have ratepayers pay half the cleanup cost and shareholders pay the other half, extend the timeline for paying off those costs, and prevent the utility from profiting from the cleanup.

Monday's proposed settlement would reduce coal ash costs included in Duke's pending North Carolina rate requests by 60%, while still allowing the utility to earn a return on the remaining cleanup costs. In the utility's 2019 ratecase, it will write off $485 million in coal ash costs for retail customers, while in future rate cases, Duke will write off more than $270 million in additional coal ash costs for retail customers, according to the attorney general's office. Savings will vary based on interest rates and how much the cleanup ultimately costs, according to the AG. The utility will also reduce its return on equity for the coal ash costs, and pay an additional $100 million environmental penalty, originally ordered by regulators in 2017.

"Today's settlement is a win for every Duke Energy customer," said Attorney General Josh Stein in a statement. "I have long held that North Carolinians should not bear the full cost of cleaning up coal ash. As a result of today's settlement, we won't — to the tune of more than $1 billion."

"This agreement addresses a shared interest in putting the coal ash debate to rest as we work toward building the cleaner energy future North Carolinians want and deserve," said Stephen De May, Duke Energy's North Carolina president, in a statement. "We were able to reach a balanced compromise that will deliver immediate and long-term savings to customers and provide greater certainty to the company over the next decade." 

The company said it would file the settlement with state regulators Monday, and final approval will be left to the commission.

Duke last year announced it would undertake the largest coal ash cleanup in U.S. history, excavating the majority of its remaining ash across its 14 coal plant sites. The cleanup constitutes a removal of 124 million tons of coal ash.