What did Duke and the Public Staff file?
Duke Energy’s two North Carolina utilities filed a settlement with the North Carolina Utilities Commission on Tuesday, October 6, that sets standard terms for very large new electricity users. News & Observer The other main party is the Public Staff, the state’s consumer advocate for utility customers. Amazon, Google, Meta, Microsoft, an industrial customer group and the U.S. Department of Defense also signed. Duke Energy The commission, which sets electric rates in the state, must approve the settlement first, and Duke expects a decision by mid-November.
The risk the settlement addresses has a name. A stranded cost is the price of grid equipment a utility builds for a customer who then never arrives or leaves early. Without contract protections, the utility’s other customers end up paying for that equipment through their rates.
Which AI data centers the terms would cover
The terms would apply to a customer that contracts for at least 50 megawatts and expects a load factor of at least 80% over a rolling 12 months. Microgrid Media A megawatt measures how much power a site draws at once. Load factor measures how close a customer’s average use comes to its peak, so a high number means the site runs near full power almost all the time. Any customer contracting for 150 megawatts or more would be covered whatever its load factor.
The terms would reach power contracts signed after June 1, 2026, with the tariff taking effect January 1, 2027 if approved. Lapel Intel Duke had previously required these protections only from customers of 100 megawatts or more. Projects that signed before June 1 stay on their existing contracts, which may include the Amazon project in Rockingham. WFAE
What a new AI data center would have to sign
A covered customer would sign a contract of at least 10 years if it is under 100 megawatts, and at least 15 years if it is larger. Lapel Intel It would also face a minimum bill. That means it pays demand charges on at least 75% of the capacity it reserved, even if it uses less. Microgrid Media
The customer pays in full, upfront and without refund, for equipment that serves only its site, such as a new substation. For wider grid upgrades needed to serve it, the customer must post a letter of credit within 60 days of signing. News & Observer A letter of credit is a bank’s promise to pay Duke if the customer does not. The customer gets most of that security back over time, but Duke keeps it if the customer exits early.
| Item | Before the settlement | Under the settlement |
|---|---|---|
| Who must accept protections | Customers of 100 megawatts or more | 50 megawatts at 80% load factor, or any 150 megawatt customer |
| Where the terms live | Private contracts kept confidential | A tariff the commission approves |
| Contract length | Set customer by customer | At least 10 or 15 years |
| Minimum bill | Set customer by customer | Demand charges on 75% of reserved capacity |
| Shared grid upgrades | Set customer by customer | Letter of credit for the full cost |
Notice periods and exit payments for customers that end contracts early
A customer that wants to reduce its reserved capacity or end its contract must give 24 to 48 months of notice. Lapel Intel During the notice period it keeps paying its minimum demand charges and its charges for dedicated equipment. After the notice period, the exit payment covers the rest of the dedicated equipment charges plus 25% of the minimum demand charges left on the contract. Microgrid Media Exit fees under the formula would run from $25 million to more than $587 million, according to the News & Observer. News & Observer
The 25% figure is where critics focus. The Southern Environmental Law Center, counsel for consumer and clean energy groups in the case, argues the formula lets a large customer walk away after paying a small fraction of the upgrades it caused. SELC The same groups object that shared transmission upgrades are first spread across all customers and repaid only over the life of the contract. WFAE
Customer class and power plant costs left for a future rate case
The settlement does not create a separate customer class for these users. Covered customers would go on Duke’s existing High Load Factor rate schedule and pay the same standard rates as any customer over 1 megawatt. News & Observer Duke would study how to assign part of shared transmission upgrades directly to the customers who trigger them and report within 12 months of approval. A separate class, and who pays for new power plants, would wait for a future rate case. Lapel Intel North Carolina’s governor said his office is reviewing the settlement. Axios
Tomorrow’s topic
The Alabama PSC’s new review procedure for data center power contracts.