Duke Energy

Duke_Energy_LogoDuke Energy, based in Charlotte, North Carolina, is one of the largest electric utilities in the United States and the company emits more carbon pollution than any other utility. Duke also ranked second in fossil fuel generation and coal-fired generation in 2016. The majority of Duke’s business is in regulated, monopoly utilities in six states: North Carolina, South Carolina, Florida, Indiana, Ohio and Kentucky. Duke’s fossil- and nuclear-dominated strategy have led to a series of scandals in recent years both for its customers and the environment.

Duke's Nuclear Debacles

Duke Energy customers in Florida are paying for nuclear power plants that will never generate electricity, drawing parallels to South Carolina’s use of the Base Load Review Act (BLRA) to finance the failed VC Summer nuclear plant. Florida’s BLRA equivalent, called the Advanced Cost Recovery Fee, passed in 2006.

According to a 2014 Integrity Florida report, Duke Energy charged its customers more than $1.5 billion for its now-canceled Levy County nuclear power plant. The same report highlighted how the utility spent $300,000 in lobbying fees to hire 15 lobbyists to advance legislation that allowed the utility to collect the charges for the nuclear plant before it generated electricity, and doled out more than $3.6 million in campaign contributions, to make sure the legislature kept the charges intact.  Duke’s scheme also allowed it to walk away from the Levy County project with $150 million in profit from its captive ratepayers. Santee Cooper in South Carolina is currently charging customers for VC Summer for the project’s failure via the same legislative mechanism.

Regulators did not formally scuttle the project until May 2018, when the Nuclear Regulatory Commission terminated the licenses for the proposed project.

Utilities, including Duke Energy, were also able to defeat a bill in the Florida state legislature in 2013 that would have required utilities to add a line item to customer electric utility bills disclosing the ‘nuclear cost recovery’ fee.

At its Crystal River nuclear plant Duke, then Progress Energy, took the unusual step of bringing an upgrade construction project in-house. Contractors hired by the company managed to crack the shell of the building and eventually the project was shut down in light of safety concerns. Charges to customers, however, continued. Duke ratepayers will pick up just shy of $1.7 billion for the next two decades for the mismanaged project.

Customers Saddled with Cost Overruns at Edwardsport “Clean Coal” Facility

In 2007, Duke Energy began construction on a 618 megawatt integrated gasification combined cycle (IGCC) power plant in Edwardsport, Indiana. IGCC plants, such as Southern Company’s failed Kemper County plant in Mississippi, are often referred to as “clean coal.” Edwardsport was originally slated to feature carbon capture and storage (CCS) technology, which would have allowed the plant to store its carbon emissions. Unlike in the case of Kemper, regulators rejected Duke’s CCS certificate. Unfazed, Duke continued construction without CCS. The plant entered commercial operation in 2013, two years behind schedule, and was immediately plagued with issues, often operating at less than half its rated capacity.

Since 2006, the price tag for Edwardsport ballooned from the initial estimate of $1.9 to $3.55 billion. It is one of the most expensive coal plants in U.S. history, and the least efficient of all of Duke Energy’s coal plants. A settlement capped the amount of money Duke collected from ratepayers at $2.6 billion.

After Duke declared Edwardsport to be “in-service” in 2013 (which meant the end of the “cost cap” on the project), it began to collect post in-service costs, such as operations and maintenance, from its customers’ bills. Years of litigation resulted, which led to another settlement in 2016 that capped capital and operations costs and forced shareholders to eat $87.5 million for Edwardsport.  

Since the 2016 settlement, Duke has continued to struggle to contain Edwardsport’s operating costs – customers have had to pay $1.4 billion more than what they would have paid if Duke bought electricity from the wholesale market. In September 2018, Duke again agreed to absorb an additional $30 million in costs and provide $1.7 million for low-income energy assistance and renewable projects in Indiana as a result of another settlement. It is likely that intervenors will again contest Edwardsport’s costs once the utility files its next rate case in mid-2019 and attempts to recover all ongoing capital costs incurred since January 1, 2018.

Before construction finished at Edwardsport, an ethics scandal exposed that employees for the Indiana Utility Regulatory Commission (IURC) negotiated jobs with Duke while participating in projects that involved the utility, including the IGCC plant. The utility soon fired the then-president of its Indiana subsidiary, Mike Reed, and a top regulatory lawyer, Scott Storms. Storms was chief administrative law judge at the IURC in 2010 when the regulators were considering if it should allow the utility to pass cost overruns onto customers. At the same time, Storms was negotiating a job with Duke. Reed was a former executive director at the IURC and then became a commissioner with the Indiana Department of Transportation before joining Duke. Emails detailed how Reed worked to make sure Storms got hired.

Duke executive James Turner also resigned after emails surfaced that detailed a cozy relationship with then IURC chairman David Harvey, who was also fired by the governor due to the ethics lapses.

Duke Guilty of Criminal Negligence for Dan River Coal Ash Spill

On February 2, 2014, a stormwater pipe burst beneath the coal ash pond at Duke Energy’s Dan River power plant in Eden, North Carolina, pouring at least 39,000 tons of coal ash into the Dan River. According the EPA, only 10% of coal ash has been removed from the river even though the cleanup continues.

The North Carolina Department of Environment and Natural Resources (DNER) quickly offered a settlement, charging Duke Energy a mere $99,111. DNER immediately revoked its own settlement offer after criticism that the terms were too lenient, especially considering a possible Clean Water Act fine on the company of up to $50 billion. Under the leadership of ex-Governor Pat McCrory, previously a 28-year employee of Duke Energy, and ex-NC State Representative and Majority Leader Mike Hager, also a former Duke Energy employee, the State of North Carolina imposed fines totaling only $7 million.

In May 2015, Duke pled guilty to nine charges of criminal negligence under the Clean Water Act. Assistant Attorney General John C. Cruden said at the time that “the massive coal ash spill into North Carolina’s Dan River last year was a crime and it was the result of repeated failures by Duke Energy’s subsidiaries to exercise controls over coal ash facilities.” Duke was fined $102 million, the largest federal criminal fine in North Carolina history.

In February 2016, the EPA proposed a $6.8 million penalty. Duke eventually settled for just under $6 million for fines, restitution, cleanup assessment, removal, and community action initiatives.

Even in light of criminal charges and civil penalties, Duke continued to force captive ratepayers to pick up the tab for the spill. In June 2018, Duke regulators allowed the company to charge customers $778 million of the estimated $5 billion in cleanup costs, leaving questions about whether customers would ultimately pay the remainder. North Carolina Attorney General Josh Stein planned to challenge Duke’s favorable ruling in court, saying, “Consumers shouldn’t have to pay for Duke’s mismanagement of coal ash, if it results in greater expenses on the consumers.”

Duke Fined $10 Million for Poor Grid Security Practices

The North American Electric Reliability Corporation (NERC) levied a $10 million fine on Duke Energy in January 2019 for a string of 127 security violations over a three year period. Duke’s penalty broke the previous record holder, Pacific Gas & Electric, which was fined $2.7 million in 2018.

In its enforcement filing, NERC stated the problems at Duke were due to, “lack of management engagement, support and accountability.” Of the 127 security violations, 62 were classified as moderate and 13 as serious. The report goes on to state that Duke’s, “disassociation of compliance and security that resulted in a deficient program and program documents, lack of implementation, and ineffective oversight and training.”

Duke’s lack of security practices could pose a significant threat to American national security as foreign actors, such as Russia and China, attempt to gain access and control the electric grid. As reported by RTO Insider, a January 2019 Senate Intelligence Report stated that “Russia has the ability to execute cyber attacks in the United States that generate localized, temporary disruptive effects on critical infrastructure—such as disrupting an electrical distribution network for at least a few hours—similar to those demonstrated in Ukraine in 2015 and 2016. Moscow is mapping our critical infrastructure with the long-term goal of being able to cause substantial damage.”

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