CHAPEL HILL, N.C. — A settlement just filed by Duke Energy and other parties in a North Carolina Utilities Commission rate case proceeding ultimately fails to hold data centers accountable for the costs of meeting their steep energy demands, potentially leaving North Carolinians on the hook for large energy bills. Duke’s proposal does not require nearly enough in upfront payments for grid improvements triggered by large customers and simultaneously allows them to walk away by paying only a small fraction of the cost of the upgrades they triggered.
In the settlement, Duke Energy outlines provisions that include some of the right protections, like a minimum billing charge to help ensure that large customers pay enough in bills over time to pay for the grid assets that the utility builds to serve them, but ultimately, it misses the mark primarily because its protections are too lenient.
The settlement differs from the commissions’ large load tariff proposal because it does not establish creating a customer class that would track costs and hold data centers accountable for paying their fair share.
The settlement was first made public October 6 and has not been made available for public comment. The settlement follows a request for comments by the North Carolina Utilities Commission, which included a model “large load tariff” of its own for discussion. In reply comments regarding the commission’s proposal, submitted by the Southern Environmental Law Center on behalf of the North Carolina Justice Center, North Carolina Housing Coalition, Southern Alliance for Clean Energy, and Vote Solar, the clean energy groups supported establishing a new customer class for all large customers.
“Duke and the hyperscalers have gone from opposing any large load tariff to asking the commission to accept one that includes many of the right protections, but in forms that are far too lenient to adequately protect against existing customers,” said Nick Jimenez, a senior attorney at SELC. “The commission should adopt a stronger large load tariff, and it must not lose sight of the potential upside to be captured by offering large customers a clean transition tariff through which they can fund new clean resources for our grid.”
In their initial comments, the groups advocated and proposed a mandatory “Large Load Tariff” that should protect North Carolina customers against the risk that the utility builds new resources to serve large customers who ultimately do not materialize or leave the state early, leaving other ratepayers paying for the “stranded assets” built to serve their needs.
“Duke is realizing that North Carolinians will not accept the risk of building out the grid for speculative data center needs, and they know the commission is listening,” said Jake Duncan, senior southeast regulatory director, at Vote Solar. “The commission has already shown it is ready to place strong protections in place for regular customers and shouldn’t walk backwards to accept the weaker provisions in Duke and the hyperscalers settlement.”
In their comments, clean energy groups urged the commission to go a step further and set a swift and firm timeline for establishing a “Clean Transition Tariff” that would allow large customers to pay for new clean energy and grid modernization to serve their electricity needs and also help protect residential ratepayers. There are large, well-capitalized companies willing to invest a lot of money to improve North Carolina’s grid. All they need is a pathway to be able to do it, the clean energy groups argued.
“The commission appeared earlier this year to be prepared to make data centers pay their way, but I am deeply concerned that Duke and the data centers have instead proposed a last-minute “escape hatch” under which they could pay only 25% of remaining electricity costs for years,” said Eddy Moore, SACE Decarbonization Director. “This is not what average citizens are demanding at this time.”
Prior to filing comments, SELC, on behalf of the same organizations, intervened in the commission’s general rate case proceedings where this “large load tariff” discussion is taking place. During these proceedings, SELC submitted an analysis by John Wilson of Grid Strategies as expert testimony, who argued for creating a customer class, as the commission has now proposed, and making sure that the tariff or rate schedule for large load customers includes protections for other customers like guarantees against “stranded asset” risks.
“A new tariff for large load customers that includes data centers must have adequate protection against stranded asset risks,” said Claire Williamson, senior energy policy advocate at the NC Justice Center. “If the utility builds facilities for data centers, the data centers can’t be allowed to walk away and leave North Carolina families and small businesses holding the bag.”
Wilson’s testimony also supported the clean transition tariff proposal: incentivizing large customers to pay for their own low cost, clean energy sources, like solar and battery storage, would reduce upward pressure on residential bills, hedge against gas price spikes, and lower air pollution.
“We are in an affordability crisis, and the last thing families need is increasing energy bills caused by data centers throwing costs onto them,” said Samuel Gunter, executive director of the North Carolina Housing Coalition. “The commission should prioritize holding large customers accountable while also encouraging clean, affordable energy solutions that decrease pollution and protect our communities from harmful fossil fuels.”
