Alabama Power Company will increase its electric rates in 2019 to cover the cost of closing its coal ash ponds throughout the state in accordance with coal ash rules finalized by the U.S. Environmental Protection Agency in 2015.

"Federal environmental rules related to water and the handling of coal ash are the primary drivers of more than $200 million in government-mandated costs that are changing the way Alabama Power delivers electricity to its customers,” Alabama Power spokesman Michael Sznajderman said via email.

Sznajderman said rates will increase about 3 percent on average, adding $4.49 a month to the average residential customer’s bill, assuming the customer uses 1,000 kilowatt-hours per month. The rate increase will impact all Alabama Power customers, about 1.4 million homes, businesses and industries, and went into effect on Jan. 1.

The details of the rate increase were presented to the Alabama Public Service Commission at an informal rate hearing in December, and no vote was required by the PSC, though Sznajderman said the company did have to report and justify those numbers to the PSC.

Earlier last year, the company announced customers would see reduced bills in 2018, as a result of the decrease in the corporate federal income tax. Sznajderman said in 2019, despite a $50 million credit stemming from federal tax reform and flat costs for fuel and general infrastructure and maintenance, the company had to increase its rates to pay for the costs of compliance with federal environmental laws.

For decades, Alabama Power’s coal-fired power plants have used wet ash ponds to dispose of the solid materials left over after burning the coal to generate electricity. The ash is flushed through a lagoon system into ponds, where the solid material settles to the bottom, and the water from the top of the ponds flows into receiving rivers or streams.

Over decades, these ash ponds have gathered millions of tons of coal ash material, which contains substances that could be hazardous to humans and wildlife, such as lead, arsenic, mercury and other heavy metals.

In 2015, Alabama Power announced it plans to cover its coal ash in place, dewatering the ash material and compacting it into a smaller footprint in its current location, but not installing a bottom liner underneath the ash. Environmental groups have lobbied Alabama Power to dig out the ash and move it to a lined landfill where the ash will not be in contact with groundwater. Alabama Power was fined $1.25 million in 2018 when groundwater testing showed widespread contamination near the company’s ash ponds, particularly with arsenic.

Alabama Power is in the process of transitioning to dry ash handling at all its plants that still burn coal. Sznajderman said the company has had to invest “significantly” in new equipment for dry ash handling and wastewater treatment facilities at its plants.

“The company is focused on identifying the most cost-effective ways to comply with mounting environmental rules while protecting the state’s natural resources,” Sznajderman said.