Utilities are taking risks when they know of dangers related to fuels and emissions and continue anyway; insurers are resisting

By Robert Walton, Utility Dive, June 15, 2017

  • More than two dozen insurance companies who previously insured Duke Energy’s coal ash disposal operations say they are not on the hook for cleanup costs because any property damage was “caused intentionally, by or at Duke’s direction.”
  • The 30 insurance companies say they have no liability in the matter because Duke stored most of the waste in unlined pits and left it there “long after it knew it had environmental problems.”
  • Because Duke Energy stored its coal ash in unlined pits as part of its normal practices, any property damage “was caused intentionally, by or at Duke’s direction” and there weren’t any distinct pollution events that triggered coverage
  • Duke has been self-insured since 1986, but its previous policies covered damage that might not be discovered for decades, according to The Republic. In March, Duke sued for assistance in paying for the cleanup of coal ash ponds in North Carolina and South Carolina.
It’s been three decades or more since Duke used outside companies to insure its coal ash storage operations, but now that the utility is on the hook for billions in cleanup costs, it wants a court to compel those companies to help pay.

If the utility is successful, Duke’s claims against the insurance companies would be payable under the North Carolina Coal Ash Management Act, which was initially passed three years ago. Recovered monies would only go to cover groundwater contamination charge, and would not go towards any federal or state fines, or to pay for cleanup of the 2014 Dan River Spill.

Duke has more than a dozen coal ash sites to clean up in North Carolina, and one in South Carolina. Last year, the utility developed a proposal to excavate 34 basins and cap another 18 basins in place as part of its efforts to protect drinking water from the waste.

But the cost to clean it all up has been rising. January, Duke said it wanted to defer recovery of more than $700 million in cleanup costs until it filed a new rate case later this year.  Duke is also expected to seek a rate increase to pay for cleanup costs that could exceed $5 billion over the next several years.

The trial between Duke and the insurers is expected to run into 2019.

The Republic – June 14, 2017

Insurers: We’re off the hook, Duke Energy knew coal ash risk

The claim is in a filing by lawyers for nearly 30 international and domestic insurance companies that were sued by Duke Energy in March to force them to cover part of the utility’s coal ash cleanup costs in the Carolinas.

The 57 policies generally promise to help Duke pay what it’s legally obligated to pay for property damage “caused by an occurrence,” even if liability for an incident doesn’t become known until decades later, the Charlotte-based company said in the same filing last week in the state court that hears complex business cases. Both sides filed the document in describing a litigation timeline that would lead to trial in mid-2019.

The insurers counter they’re not on the hook to pay. They say that because Duke Energy stored its coal ash in unlined pits as part of its normal practices, any property damage “was caused intentionally, by or at Duke’s direction” and there weren’t any distinct pollution events that triggered coverage.

They note that Duke was well aware that burning coal to generate electricity leaves byproducts containing toxic substances that can contaminate groundwater. They say Duke’s ash ponds were built without safeguards to prevent groundwater pollution, and some ash ponds placed the ash in direct contact with groundwater.

“Duke continued to dispose of (coal ash) in unlined ash ponds long after it knew it had environmental problems. By the 1990s Duke submitted insurance claims to some of the defendants and other insurers for the same ash ponds that are now at issue in this action. Although Duke was aware of these issues, it continued to operate its unlined ash ponds for decades,” the companies’ lawyers said.

Duke Energy has estimated its liability for cleanup and storage efforts at $5.1 billion for 14 North Carolina coal ash sites and one in South Carolina. The utility had spent more than $725 million through November. Money recovered from insurers would reduce the price tag for consumers, the company has said.

The utility earlier this month asked North Carolina regulators for rate increases starting next year that include passing along to customers about $977 million over five years. South Carolina’s utilities commission allowed Duke Energy Progress to start recouping coal ash cleanup costs as part of a $56 million rate increase approved in December.

Coal ash contains arsenic, lead, mercury and other elements that may be hazardous in sufficient concentrations. Environmentalists and state regulators have alleged those heavy metals have been draining through the unlined bottoms of pits where liquefied coal ash has been stored for decades.

A pit at a Duke Energy plant in North Carolina ruptured in 2014, coating miles of the Dan River in gray sludge.

Duke Energy said it stored coal ash in line with industry practices and regulations that were in place over preceding decades.

Duke Energy delivers electricity to about 7.4 million customers in the Carolinas, Indiana, Ohio, Kentucky and Florida.

  • The Charlotte Business Journal reports Duke Energy has filed a lawsuit against more than two dozen insurance companies that previously covered its coal ash waste containment operations—but Duke has been self-insured since 1986.
  • According to the news outlet, the companies provided general liability insurance to Duke from the early 70s through the mid-80s. However, Duke says they may still be on the hook for claims regarding groundwater contamination.
  • Duke is expected to seek a rate increase to pay for cleanup costs that could exceed $5 billion over the next several years.
Earlier this month, a poll from a conservative renewable energy advocacy group showed more than 80% of North Carolina residents said the utility should pay the costs to clean up its coal ash. Now, it seems Duke is looking for alternative ways to spread the costs around.

According to the Triangle Business Journal, Duke’s claims against past insurance companies would be payable under the North Carolina Coal Ash Management Act, which was initially passed three years ago. Recovered monies would only go to cover groundwater contamination charge, and would not go towards any federal or state fines, or to pay for cleanup of the 2014 Dan River Spill.

In 2016, Duke developed a proposal to excavate 34 basins and cap another 18 basins in place as part of its efforts to protect drinking water from the waste. But the cost to clean it all up has been rising. A similar rate case is expected in South Carolina in 2018. In January, Duke said it wanted to defer recovery of more than $700 million in cleanup costs until it filed a new rate case later this year.

Duke’s lawsuit does not give a specific figure for damages it seeks to recover, but the utility wants the N.C. Business Court to hear the case and believes the underlying value could exceed $1 billion.

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