The fundamental details of this case come down to a $320 million pile of coal that Cleco and SWEPCO decided to burn at the Dolet Hills Power Station and then charge their customers for (with fuel cost hikes). Over the plant’s final years of operation costs to customers for a MWh of power produced from this plant increased from roughly $86/MWh for both utilities in 2017 to $345/MWh for Cleco and $310 for SWEPCO customers in 2021 when the plant stopped generating power.
While the Administrative Law Judge recommended $128M refund from Cleco to customers and $55.4M from SWEPCO to customers, the final refund amounts approved by the Commission were $100M from Cleco and $25M from SWEPCO. Most of these funds won’t go back to customers in the form of a check or even all as bill credits, as some of the funds will be subtracted from other costs customers would have to pay in the future. More on this below.
Unfortunately this isn’t even the last that customers have seen of Dolet Hills costs. When a plant like this is closed, there are costs to dismantle the facility and mine and repair the land it sits on, which is called decommissioning. This ranges from cleaning up a coal ash pond to deconstructing the facility. The utilities are expected to use a financial mechanism called “securitization” which allows them to purchase lower cost debt to cover large expenses. This time, they’ll securitize the decommissioning costs of the plant and mine. Customers still pay for securitized debt, but the utility doesn’t earn money on it and the costs are somewhat lower than they would be otherwise. In this case, Cleco had reported the expected cost of retiring and decommissioning the plant will be more than $360M. The high number is largely due to the intensive remediation of the land due to the toxic nature of burning and mining coal.
Last year, the Louisiana Legislature passed a bill allowing for the securitization of decommissioning costs. Historically this financial mechanism was only available in Louisiana to manage extreme storm costs. There is a national discussion about securitizing the costs of retirement, decommissioning, or other “energy transition” efforts as a way to reduce the costs of transitioning away from fossil fuel stranded assets. Cleco is expected to ask the Commission to securitize these decommissioning costs by the end of 2024. The thing The Alliance will be watching in this part of the case is whether Cleco will try to turn around and charge the refunds the Commission just approved back to customers within the securitization, which last year’s new law allows. Basically the law from last year allows a utility to bundle refunds directed by the Commission into a securitization package to then charge customers for them all over again. We expect these securitization costs to appear on customers bills in early 2025.
The most immediate and visible impacts of the settlement will be $60M of Cleco’s portion, which will be refunded to ratepayers as a credit on summertime bills (July-September) for the next three years. Commission staff stated that this will look like a credit of $11-12 per month for a typical residential bill in the summer. This is welcome news for Cleco customers who have been struggling with high energy costs.
The rest of the refunds for both utilities will go towards reducing future costs customers would otherwise have to pay. For example, the remaining $40M due back from Cleco will be subtracted from the total decommissioning costs that will likely be securitized this fall (as described above). This will reduce the total amount to be securitized from $360M to $320M. The settlement also refers to $15M in cost reductions to the decommissioning costs that Cleco has identified in updated estimates for demolition and remediation at the site. In the end, to retire, dismantle, and remediate the Dolet Hills Power Station, Cleco now anticipates securitizing $305 million. SWEPCO’s $25 million refund will likewise show up as a reduction in customers’ costs to retire and decommission the coal mine, but SWEPCO customers won’t see any direct refund credit on their bills.
This Commission-approved settlement is a powerful reminder that the legacy of fossil fuels and their impacts to Louisianans is expensive and long-lasting.
The part of this story that has been ignored is the external costs of burning this pile of coal. Lignite coal is a low-density, highly polluting fuel, and the emissions impacts of this imprudent decision cost more than just the “market” value of the energy that residents and businesses were forced to pay. Louisiana does not assign a value to carbon dioxide or other pollutants, but these “external” costs are significant, and include the health impacts, like asthma or respiratory distress, to those communities near the plant who were subjected to pollution in the plant’s final years. Carbon dioxide emissions alone equalled 3,505,242 tons between 2019-2021. The federal government assigns a per ton social cost of CO2 at $56 to acknowledge the impacts of burning fossil fuels, including immediate and long-term health costs, costs of increasingly extreme heat and cold and even storms. In other words, you could say the unacknowledged costs of burning off this pile of coal totaled an additional burden to society.
