20150041 Ver 1_Attach A L. Good Letter_20150224

DUKE
ENERGY,
March 12, 2014
Mr. Pat McCrory
Governor of the State of North Carolina
NC State Capitol
1 East Edenton Street
Raleigh, NC 27601
Mr. John Skvarla
Secretary, Department of Environment and Natural Resources
NC State Capitol
1 East Edenton Street
Raleigh, NC 27601
Dear Governor McCrory and Secretary Skvarla:
Lynn J. Good
President, CEO and Vice Chair
Duke Energy Corporation
550 South Tryon Street
Charlotte, NC 28202
This letter provides an update to my February 28 letter and delivers recommendations
for near -term and longer -term actions at our ash basins in North Carolina. Taken
together, these near -term and longer -term actions comprise our comprehensive ash
basin plan. Our recommendations have been developed around guiding principles
designed to prevent future events and to identify opportunities to improve ash pond
management activities.
We are committed to working with the State of North Carolina, the North Carolina
General Assembly, the North Carolina Utilities Commission (NCUC) and all of our
regulators as we develop an updated, comprehensive plan that protects the
environment and provides safe, reliable and cost - effective electricity to North
Carolinians. As we progress through implementation, we will continue to refine and
expand these recommendations, including the design, engineering and cost
estimates. We will also be working on these matters with our regulators in other
states we serve.
We have accepted responsibility for the Dan River ash discharge and have taken a
number of immediate actions following the event:
We installed a permanent plug on the 48 -inch stormwater pipe on February 8,
and permanently plugged the 36 -inch pipe on February 21.
Crews have removed coal ash in an area of the riverbed below the broken
stormwater pipe's discharge point. We will continue to work with state and
federal agencies as we determine next steps needed for the river.

Company representatives presented information about the Dan River ash release
to the North Carolina General Assembly's Environmental Review Commission on
February 17 and to the NCUC on February 24.
We have worked with the North Carolina Division of Water Resources to redirect
stormwater around the basins in a manner compliant with our National Pollution
Discharge Elimination System (NPDES) permit, until a permanent solution is
devised.
We, along with various agencies, have continually tested the water in the Dan
River. The drinking water has remained safe.
We will continue to work with you, your staffs and all appropriate regulatory agencies to
finalize our work at Dan River.
For more than a century, our company has provided reliable and affordable electricity to
our customers. Coal -fired power plants produced a good portion of that electricity.
Throughout the past few decades, we have dedicated significant resources to the
management and monitoring of our ash basins. We continue to place the safe
operations of these ash basins as one of our highest priorities.
We have formed a team dedicated to strengthening our comprehensive strategy for
managing all of our ash basins. John Elnitsky, most recently the company's vice
president of project management and construction, is leading this effort. This team will
focus on implementing our recommendations listed below as well as identifying and
addressing ongoing improvement opportunities. This work will provide an opportunity
for us to assess our ongoing storage techniques and will influence the ash basin closure
strategies for our retired facilities, recognizing that any storage technique embodies cost
and risk - reduction tradeoffs. We want to make certain that we, our regulators and other
stakeholders can have a high degree of confidence in the integrity of our ash basins.
As stated above, our comprehensive plan is comprised of both near -term and longer -
term actions. Our near -term actions set forth below address three specific retired
plants, specific actions related to three active operating units (Cliffside 5 and both
Asheville units), and an approach to reduce risk on remaining ponds at all retired plants.
These actions are first steps in a more comprehensive plan that will address all retired
sites (21 ponds /7 sites) and pond management at active sites (12 ponds /7 sites). Of
course, implementing our near -term recommendations and longer -term plans depends
on state and federal agreement that these are prudent, cost - effective and
environmentally sound options. They are as follows, with associated time frames:
• Permanently close the Dan River ash ponds and move ash away from the river to
a lined structural fill solution or a lined landfill. This work will be started
immediately upon securing the appropriate fill solution or landfill location and any
necessary permits, with an expected completion thereafter of 24 -30 months.
• Accelerate planning and closure of the Sutton ash ponds to include evaluation of
possible lined structural fill solutions and other options. A conceptual closure
plan will be submitted to the North Carolina Department of Environment and
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Natural Resources (NCDENR) within six months, and removing the water from
the ash basins will be completed in the next 18 -24 months.
• Move all ash from Riverbend away from the river to a lined structural fill solution
or a lined landfill. Work will begin immediately upon securing the appropriate fill
solution or landfill location and any necessary permits, with an expected
completion thereafter within 48 -54 months.
• Continue moving ash from the Asheville plant to a lined structural fill solution.
We continue to look for ash reuse opportunities where such uses remain
permissible under the upcoming coal ash regulations.
• Convert the three remaining North Carolina units to dry fly ash (Cliffside 5 and
both Asheville units) or retire the units. Conversion work, if selected, will be
completed within 30 -36 months of receiving permits.
• Minimize the potential risk of a discharge similar to Dan River by accelerating the
removal of water from the ash ponds at all retired coal plants. Upon receipt of
permits, dewatering will be completed within 24 -36 months.
In addition, we have taken immediate action to initiate a near -term comprehensive
engineering review of all of our ash basins to identify and address potential risks. This
review consists of a risk - informed approach to confirm the structural integrity of the ash
basins and associated structures, as well as the characterization and evaluation of all
stormwater discharges near ash basins. We expect this engineering review to continue
over the next six -to -eight months.
We are also developing a comprehensive longer -term ash basin strategy for all ash
ponds in North Carolina and throughout our service territory. This strategy will include a
review of active ponds, inactive ponds and closure strategies for the remaining retired
plants, will be informed by outside experts, and will include a risk - informed, tiered
approach. The work will include a review of the effectiveness of ash storage
management programs and practices to confirm that longer -term solutions are
sustainable and lessons learned are captured for company -wide application. This
comprehensive strategy will evaluate options up to and including complete conversion
to all dry handling. This work will be completed by year -end.
We want to get the near -term and longer -term strategies right and implemented in a
timely way. That will require close coordination with NCDENR and /or the United States
Environmental Protection Agency (EPA) on permitting, as well as consideration of many
factors including environmental and transportation issues for each community where
coal ash is stored. We look forward to working with and incorporating the input of those
agencies, as well as your offices and the General Assembly, to accomplish these
objectives.
As our plans progress, it will be important to align our steps with upcoming federal
regulations. The EPA issued a proposed rule on June 21, 2010, regarding federal
regulation of coal ash. A final rule is expected by December 19, 2014. In addition, the
EPA issued a proposed rule June 7, 2013, for Steam Electric Effluent Guidelines that
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regulates wastewater streams from power plants. The final rule is expected no sooner
than May 2014. Our longer -term solutions must satisfy these rules.
As we continue to refine our recommendations, we would like to meet to discuss the
near -term items and our comprehensive strategy. Such a meeting should include
technical expertise from the company and your agencies to listen to and challenge
assumptions. Cost estimates to implement these recommendations are very dependent
upon the actual disposal methods that are approved (e.g., cap in place versus structural
fill or lined landfills), and we will work with the state to make estimates available as we
narrow the range of options at each particular site.
Low -cost power generation has fueled the development of our state over the last
century. As scientific knowledge and technology have advanced, we have worked
constructively with the policymakers and regulators of our state to develop cost - effective
ways to continue providing reliable, low -cost energy to our citizens while protecting
public health and the environment.
We look forward to continuing this work as we develop and implement these
recommendations for both immediate and longer -term solutions to coal ash storage and
disposal.
Sincerely,
'�w
Lynn J. Good
President and Chief Executive Officer
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