Duke Energy proposes special rules for data centers in North Carolina

For months, clean energy and consumer advocates in North Carolina have pressed Duke Energy to follow the national trend and create special rules and prices for data centers. The state’s predominant utility insisted such rules were unnecessary, rejecting claims that the power-hungry facilities could overwhelm the grid or burden households with unfair costs.

But now, the company is changing its tune.

In testimony submitted to the North Carolina Utilities Commission in late June, Duke proposed what it calls a ​“large load tariff” — a scheme by which data centers and other big electricity customers would pay a minimum bill amount for at least a decade, no matter their actual power use.

The transparent setup would replace the confidential, one-off service agreements that Duke makes with large energy users now. The system would result in a ​“measured set of customer protections” as data centers flock to the state, the company said.

Duke recently raised its 2035 forecast of electricity demand from large customers to 8 gigawatts in the Carolinas — an increase of 2 gigawatts since its projection from last year — with most of the new growth expected in the form of the gigantic computer warehouses. The company is using that prediction to help justify building a whopping 9.7 gigawatts of new gas plants over the next decade.

Around the nation, large load tariffs are gaining steam as states scramble to prevent the AI boom from exacting an enormous cost on consumers and the climate. At least 75 such tariffs have been proposed or approved in some 35 states, according to data tracked by the Smart Electric Power Alliance and the North Carolina Clean Energy Technology Center. 

Duke’s about-face on large load tariffs comes as it prepares to defend its deeply unpopular bid to raise electricity prices at commission hearings that begin July 7. The company has lowered its original rate request but still seeks an increase of 11.6% over two years for residential customers. 

The reversal on data centers follows advocacy from the state’s attorney general, state-sanctioned consumer advocate Public Staff, and clean energy groups — all of which have argued for large load tariffs.

“This is a welcome development,” said Munashe Magarira, senior attorney with the Southern Environmental Law Center, which is representing the Southern Alliance for Clean Energy, the North Carolina Housing Coalition, and other nonprofits at the commission as it weighs Duke’s rate-hike request.

“It builds on hard work that’s been done to push the commission to address these issues head on because of the impact large customers will have for the utility, the grid, and society as a whole in North Carolina,” he said.

Advocates argue Duke’s proposal still has shortcomings

Still, Magarira said, Duke’s proposal falls short in a few ways. The company recommends that large electricity users pay at least 75% of their maximum potential energy use, instead of the 85% proffered by advocates. The tariff would make minimum contract terms of 10 or 15 years — less than the 20 years proposed by the nonprofit coalition. And it would only apply to customers with loads of at least 50 megawatts, as opposed to the 25-megawatt floor that the nonprofits pushed for. 

Advocates say these details matter because it’s vital to minimize risk as much as possible: If Duke builds expensive gas-burning power plants and other infrastructure in anticipation of data centers that don’t materialize as planned — a distinct possibility, according to some analysts — households could be left holding the bag. 

Even more concerning for Magarira: Duke doesn’t appear to propose that data centers become a new class of customers. Instead, it offers to standardize the bilateral service agreements it already signs with tech companies.

The distinction is more than semantic, he said. A separate customer class would better enable regulators to design rates tailor-made for data centers and their immense energy needs. 

“If the projections are right, we’re facing a pretty unique moment with regards to electricity growth,” Magarira said. ​“We think there’s a real need to create a separate customer class for these customers — just given how different they are.” 

A final overarching concern: Duke’s most recent filing fails to mention a ​“clean transition tariff.” Such programs are vital in vertically integrated electricity markets like North Carolina’s, where entities that want 24/7 carbon-free energy can’t independently contract for it. Only Duke can sell them electricity, so if Big Tech firms want to pay for clean electrons for their data centers — as many say they do — they need a program like a clean transition tariff that lets the utility serve as a go-between.

A handful of other states have enacted clean transition tariffs. In North Carolina, the idea has been bandied about for years, and Duke has publicly agreed to consider it. But the utility has never formally proposed such a tariff to regulators. 

“Let large customers who want to be good corporate citizens, who care about the environment, have the opportunity to purchase incremental clean energy to meet their power consumption,” Magarira said. ​“That feels like a win-win for everyone involved.”

Duke declined to comment for this story, pointing instead to its testimony. The five-member Utilities Commission could open a separate docket on the large load tariff proposal. Otherwise, its decision on that and other matters in the rate case is expected this fall.