Image: Sludge from spill
Tennessee Valley Authority via AP
The trail of sludge from the coal ash spill at a power plant in in Kingston, Tenn., is seen on Dec. 23, the day after the spill.
updated 2/12/2009 6:17:31 PM ET 2009-02-12T23:17:31

It could cost as much as $825 million to clean up a river and a rural neighborhood after a massive spill of coal ash sludge from a Tennessee Valley Authority power plant, the utility's chief executive said Thursday.

President and CEO Tom Kilgore told the TVA board of directors that the nation's largest public utility had already spent $31 million on the work from December through the end of January.

It was the first board meeting since 1.1 billion gallons of coal ash sludge broke out of a containment pond on Dec. 22, flooding homes and pouring into a river inlet near the Kingston Fossil Plant, about 40 miles west of Knoxville. No one was hurt, but 300 acres were covered with up to 9 feet of grayish muck.

The disaster brought national attention to coal ash containment ponds, which are located at more than 150 plants in 32 states, and the need for greater federal regulation.

Kilgore revealed for the first time the estimated cost of cleaning up the spill was between $525 million and $825 million, depending upon "a number of things we don't know yet." Kilgore said those unknowns included the number of times the coal waste will have to be moved and how fast dredging the Emory River can be done.

Estimate excludes lawsuits
Kilgore's estimate does not include potential costs from several class-action lawsuits that have been filed on residents' behalf or possible environmental fines.

To cover the costs, the utility will look at what is covered by insurance and then consider options, such as tapping a fund set aside for closing ash ponds, borrowing money or long-term bond financing. All would be "with the idea to minimize the impact on rates," said TVA Director Dennis Bottorff, chairman of the Finance and Rates Committee.

Last fall the TVA board approved a 20 percent electric rate increase, the largest in nearly two decades, though it has since dialed back that increase because of falling fuel prices. Another reduction announced Thursday, taking effect April 1, will bring the total hike to 5 percent for the year.

The average monthly bill for a typical residential customer in the TVA region that covers Tennessee, Mississippi, Alabama, Kentucky, Georgia, North Carolina and Virginia is $96.

The estimate for cleanup came as the TVA reported a net loss of $305 million on $717 million in revenue in the first quarter ending Dec. 31, compared to an $8 million profit for the same period a year ago. The agency blamed the losses on the Kingston cleanup.

Bonuses suspended
The board also voted Thursday to cut Kilgore's pay package in half this year, suspending about $1 million in performance bonuses for him as well as bonuses for some two dozen executives who report to him. Merit raises for managers and other incentives for TVA's 11,000 work force also will be suspended.

Also Thursday, a U.S. House subcommittee held a hearing on legislation that would direct the Interior Department to set uniform design and engineering standards for coal ash ponds at power plants. The agency has similar regulations for coal slurry ponds at coal mines.

West Virginia Democrat Nick Rahall, the author of the bill and the chairman of the House Natural Resources Committee, said he hopes to move the legislation soon. He said the bill is aimed at ensuring the structural stability of coal ash storage, but broader issues remain, including regulating the disposal of the waste.

"We need to learn a lesson from what happened at Kingston, Tennessee," Rahall said. "I believe we have a ticking time bomb on our hands."

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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