A new analysis of the financial position of Duke Energy and Duke Energy Carolinas shows that the companies can afford to pay the expected $2 to $10 billion for coal ash cleanup in North Carolina without new rate hikes for their customers.
The financial review, conducted by the non-profit Institute for Energy Economics and Financial Analysis (IEEFA), concludes that the two entities can develop a financial plan that combines: 1) additional borrowing by Duke Energy Carolinas; 2) cash resources from operating flows; 3) adjustments to the company capital projects portfolio (a capital expenditure program that already includes funds set aside for ash management); 4) slower dividend growth; 5) sales of underperforming or noncore assets and 6) insurance. Prudent management of these financial resources should allow the company to undertake the cleanup without any material impact on long term company performance.
Duke has said it plans to seek rate hikes to cover the clean-up costs. Tom Sanzillo, Director of Finance for IEEFA, who authored the review, commented: “Duke needs to take a long view here. Their home base is in trouble, fixing it should be their first priority.”
Duke’s first quarter 2014 filings with the Securities and Exchange Commission (SEC) estimate a cost of $2 to $10 billion to clean up the coal ash from 14 open and closed coal-fired power plants in North Carolina. The investigation into the costs of cleanup was triggered by Duke’s release of 30,000 to 39,000 tons of coal ash, and 24 to 27 million gallons of basin water, from its closed Dan River plant into the Dan River on February 2, 2014. Duke has been subpoenaed by the US Attorney’s office as part of a federal investigation of the relationship between Duke and state regulators.
“North Carolina residents and Duke Energy are partners,” Sanzillo commented. “That means mutual responsibility and mutual commitments. For Duke to seek a rate increase to pay for the coal ash cleanup amounts to a breakdown of its responsibilities, and is both one-sided and short-sighted.”
IEEFA conducts research and analyses on financial and economic issues related to energy and the environment. This review was conducted by Tom Sanzillo, Director of Finance for IEEFA, who has 30 years of experience in public and private finance. He has written extensively over the last seven years on coal and energy related issues. He served as the first deputy comptroller of New York State, a job that put him in charge of the finances of 1,300 units of local government, the management of 44,000 government contracts annually, oversight of over $200 billion in state and local municipal bond programs and the head of a $156 billion pension fund.