Duke Energy, tech giants, industry groups cut a dirty deal on data center electricity rates
Last week, Duke Energy, tech giants behind data centers (including Amazon, Google, Microsoft and a subsidiary of Meta), CIGFUR (an industry advocacy group), the Department of Defense, and the NC Utilities Commission Public Staff, agreed to a proposed settlement that lays out contract terms large load users will have to abide by in new agreements. The deal does not create a separate class of tariff for large customers, instead using the existing rate structure but with new rules, and only applies to deals that are signed after June 1, 2026.
Going forward, the large load tariff that Duke and other industry groups have agreed on includes some guardrails meant to prevent large customers from passing electricity costs on to residential customers. It requires significant upfront payments, a large percentage of requested energy costs to be paid – regardless of whether the energy is used or not – and makes it expensive for customers to break a contract. For example, a 500-megawatt customer could owe between $25.6 million and $587.4 million depending on when and how the developer exits, according to the agreement.
Deal still favors Duke and richest tech companies, while leaving residential customers potentially holding the bag
The agreement also requires large customers to pay upfront for “dedicated facilities” that will only support that project, such as new substations to get power from the grid. But that doesn’t apply to other transmission upgrades. Those costs would be spread across all customers in the beginning, and paid back over the course of the data center’s contract with Duke. This would raise rates in the short term and possibly lower them in the long term. There is still significant risk for residential customers if the data center exits its contract early – then it would only pay a fraction of its remaining balance.
North Carolina Attorney General Jeff Jackson pushed back on the deal. “Trillion-dollar tech companies can afford to build the infrastructure they need to power their data centers. North Carolina families shouldn’t have to pay for that,” said AG Jackson. “Our position is that we must protect ratepayers from getting hit with the costs of these data centers.”
Numerous advocates felt Duke and the tech companies were trying to pre-empt tougher rules by coming to an agreement before the NCUC acts. “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.”
No clean energy requirement
Matt Abele, director of the North Carolina Sustainable Energy Association, said that public interest groups had wanted the tariff to incentivize data center customers to provide their own clean energy — a move that could encourage developers, rather than Duke ratepayers, to pay for new power plants that serve data centers. State regulators and data center developers had said they were interested in such a proposal, called a Clean Transition Tariff, but it never appeared in the final agreement.
“It’s incredibly disappointing, given the fact that we consistently see clean resources continue to be the most cost-effective generation assets for ratepayers, and also the most effective tools to provide speed to market for these large load customers that are looking to interconnect to the grid faster,” Abele said.
The NC Utilities Commission still has final approval of the deal. Multiple environmental and clean energy groups filed comments proposing alternatives.