Duke Energy Carolinas, LLC v. S.C. Office of Regulatory Staff

Decision Date27 October 2021
Docket NumberAppellate Case 2019-001904,28066
PartiesDuke Energy Carolinas, LLC, Appellant-Respondent, v. South Carolina Office of Regulatory Staff, Hasala Dharmawardena, CMC Recycling, Cypress Creek Renewables, LLC, South Carolina Department of Consumer Affairs, Sierra Club, South Carolina Coastal Conservation League, South Carolina Energy Users Committee, South Carolina Solar Business Alliance, Inc., South Carolina State Conference of the National Association for the Advancement of Colored People, Upstate Forever, Vote Solar, and Walmart, Inc., Respondents, of whom South Carolina Energy Users Committee is Respondent-Appellant. And Duke Energy Progress, LLC, Appellant, v. South Carolina Office of Regulatory Staff, Nucor Steel-South Carolina, Cypress Creek Renewables, LLC, South Carolina Department of Consumer Affairs, Sierra Club, South Carolina Coastal Conversation League, South Carolina Energy Users Committee, South Carolina Solar Business Alliance, Inc., South Carolina State Conference of the National Association for the Advancement of Colored People, Upstate Forever, Vote Solar, and Walmart, Inc., Respondents.
CourtUnited States State Supreme Court of South Carolina

Duke Energy Carolinas, LLC, Appellant-Respondent,
v.
South Carolina Office of Regulatory Staff, Hasala Dharmawardena, CMC Recycling, Cypress Creek Renewables, LLC, South Carolina Department of Consumer Affairs, Sierra Club, South Carolina Coastal Conservation League, South Carolina Energy Users Committee, South Carolina Solar Business Alliance, Inc., South Carolina State Conference of the National Association for the Advancement of Colored People, Upstate Forever, Vote Solar, and Walmart, Inc., Respondents,

of whom South Carolina Energy Users Committee is Respondent-Appellant. And Duke Energy Progress, LLC, Appellant,
v.
South Carolina Office of Regulatory Staff, Nucor Steel-South Carolina, Cypress Creek Renewables, LLC, South Carolina Department of Consumer Affairs, Sierra Club, South Carolina Coastal Conversation League, South Carolina Energy Users Committee, South Carolina Solar Business Alliance, Inc., South Carolina State Conference of the National Association for the Advancement of Colored People, Upstate Forever, Vote Solar, and Walmart, Inc., Respondents.

No. 28066

Appellate Case No. 2019-001904

Supreme Court of South Carolina

October 27, 2021


Heard May 26, 2021

Appeal from the Public Service Commission

Robert E. Stepp and Frank R. Ellerbe III, both of Robinson Gray Stepp & Laffitte, LLC, of Columbia; Sarah P. Spruill, of Haynsworth Sinkler Boyd, P.A., and Heather Shirley Smith, both of Greenville; and Thomas S. Mullikin, of Mullikin Law Firm, of Camden, all for Appellants-Respondents Duke Energy Carolinas, LLC and Duke Energy Progress, LLC.

Jeffrey M. Nelson, Jenny Rebecca Pittman, C. Lessie Hammonds, Andrew M. Bateman, Alexander W. Knowles, Christopher Michael Huber, and Steven W. Hamm, all of Columbia, and Wallace K. Lightsey, of Wyche Law Firm, of Greenville, all for Respondent South Carolina Office of Regulatory Staff; Scott Elliott, of Elliott & Elliott, P.A., of Columbia, for Respondent-Appellant South Carolina Energy Users Committee; Carolyn Grube Lybarker, of Columbia, and Laura Rebecca Dover, of York, both for Respondent South Carolina Department of Consumer Affairs; Alexander George Shissias, of The Shissias Law Firm, LLC, of Columbia, for Respondent CMC Recycling; Richard L. Whitt, of Whitt Law Firm, LLC, of Irmo, Stephanie Underwood Eaton and Carrie H. Grundmann, both of Spilman Thomas & Battle, PLLC, of Winston-Salem, North Carolina, and Derick P. Williamson, of Mechanicsburg, Pennsylvania, all for Respondents

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Cypress Creek Renewables, LLC, South Carolina Solar Business Alliance, Inc., and Walmart, Inc.; Bess Jones DuRant, of Sowell & DuRant, LLC, of Columbia, and Thadeus B. Culley, of Chapel Hill, North Carolina, both for Respondent Vote Solar; Robert Guild, of Robert Guild, Attorney at Law, of Columbia, and Bridget M. Lee, of Washington, D.C., both for Respondent Sierra Club; and Katherine Lee Mixson, of Southern Environmental Law Center, of Charleston, and Gudrun E. Thompson and David L. Neal, both of Chapel Hill, North Carolina, all for Respondents South Carolina Coastal Conservation League, Upstate Forever, and South Carolina State Conference of the National Association for the Advancement of Colored People.

Wm. Grayson Lambert and Bradley S. Wright, both of Burr & Forman, LLP, of Columbia, for Amicus Curiae South Carolina Farm Bureau Federation.

KITTREDGE ACTING CHIEF JUSTICE

This case involves two consolidated cross-appeals from the Public Service Commission's (PSC) determinations regarding the most recent ratemaking applications filed by Duke Energy Carolinas, LLC (DEC) and Duke Energy Progress, LLC (DEP) (collectively, Duke or the two Duke entities).[1] Each Duke entity owns one coal-fired power plant in South Carolina and seven coal-fired power plants in North Carolina, for a total of sixteen affected plants. In their ratemaking applications, the two Duke entities sought recovery for expenses related to their plants in both states, with those costs shared proportionately between their North and South Carolina customers. The PSC, in two lengthy and thoughtful orders, allowed in part and disallowed in part the requested expenses. On appeal, Duke now contends the PSC erred in disallowing (1) environmental compliance costs associated with North Carolina law; (2) litigation costs incurred by Duke in defending itself from various lawsuits; and (3) carrying costs on specified deferred accounts. In the cross-appeal, the South Carolina Energy Users Committee (SCEUC) contends the PSC erred in allowing DEC recovery of costs associated with a now-abandoned

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nuclear project in Cherokee County (the Lee Nuclear Project) because of the South Carolina General Assembly's recent repeal of the Base Load Review Act (BLRA).

We affirm the PSC's decisions in full because its decisions are supported by substantial evidence in the record, are not arbitrary or capricious, and are not controlled by an error of law. The PSC's orders in these two cases are exemplary in that they clearly set forth in detail the arguments and evidence presented by both sides, and then equally clearly articulate reasons for selecting one side's arguments or evidence over the other. Many of the issues on appeal involve judgment calls based on factual determinations, and given our deferential standard of review, we cannot say the PSC's decisions are unsupported or irrational. Moreover, after careful review, we respectfully reject Duke's effort to recast the PSC's factual findings as legal errors. We therefore affirm the PSC's comprehensive orders.

I.

a. History of CCR Treatment and Regulation

Beginning in the 1920s, much of Duke's power generation came from coal-fired power plants, each of which produced coal combustion residuals (CCRs or, colloquially, coal ash) as a byproduct of energy production.[2] Until the 1950s, and in accordance with industry standards and environmental laws (or, more accurately, the lack thereof) at the time, CCRs were manually collected and transported to storage or dumping sites, most of which were unlined landfills.[3]However, in the 1950s, the electric utility industry began to utilize a water sluice

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process that automatically transported CCRs to ash storage basins, also known as coal ash ponds.[4] This process was known as wet ash handling and, obviously, created a significant amount of polluted wastewater. The wet ash handling process was unregulated until the Clean Water Act was passed in the 1970s. From then until 2015, a coal-fired power plant was required to obtain a Clean Water Act permit issued pursuant to the National Pollutant Discharge Elimination System (NPDES). A violation of the NPDES permit constituted a violation of the Clean Water Act. Thus, so long as the plant complied with its NPDES permit, wet ash handling was considered the standard, legal way to dispose of CCRs.

Nonetheless, it was known from at least the late 1970s that CCR wastewater presented a serious potential source of surface and groundwater contamination, and that the wastewater could cause extensive environmental damage if not properly handled. Likewise, the risks CCRs posed to human health were well documented. As a result, beginning around the late 1970s, the practice of using unlined coal ash ponds to dispose of CCRs and the associated wastewater became the subject of sporadic criticism and concern, albeit not federal lawmaking.

b. The Beginnings of Modern CCR Regulation

In December 2008, there was a catastrophic coal ash spill in Tennessee that released 5.4 million cubic yards of coal ash and wastewater into a nearby river, affecting about three hundred acres of land surrounding the coal ash pond. As a result, in June 2010, the United States Environmental Protection Agency (EPA) proposed new additional regulations under the Resource Conservation and Recovery Act to directly address the risks associated with the disposal of CCRs, rather than only incidentally regulating CCR disposal under the Clean Water and Clean Air Acts. Pursuant to the federal Administrative Procedures Act, the proposed regulations were the subject of extensive study, examination, and comments from a variety of special interest groups ranging from environmental organizations to the electric utility industry.

Meanwhile, in North Carolina in 2011 and 2012, several Duke employees, including engineers and a station manager, recommended inspecting via video camera specific pipes leading to the Dan River plant's coal ash pond, at a cost of approximately $20, 000. These Duke employees were concerned that the pipes may have deteriorated over time. Duke management denied the modest funding

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requests. Less than two years later, in February 2014, a sixty-year-old pipe at the Dan River facility failed, resulting in the unpermitted discharge of approximately 27 million gallons of coal ash wastewater and 39, 000 tons of coal ash, which flowed more than 62 miles down the Dan River in North Carolina and Virginia. Apparently, the pipe had never been examined since its installation in the 1950s, and a subsequent inspection revealed extensive corrosion that would have been visible had the video survey been performed as requested.

Duke subsequently entered pleas for criminal negligence related to its handling of the Dan River spill, including admitting its negligence in operating and maintaining the coal ash pond for years prior to the spill. Likewise, Duke pled guilty to criminal negligence and state environmental violations related to additional, unpermitted coal ash leaks at several of its other plants that resulted in further environmental damage in North Carolina.

c. The Resulting North Carolina Statutory Scheme: CAMA

Acting quickly after the Dan River spill, the North Carolina General Assembly took only two months to draft an initial, comprehensive statutory scheme intended to address CCR storage and cleanup in the state, titling the new legislation the Coal Ash Management Act...

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