North Carolina lawmakers are looking to overhaul 2021 energy legislation, including eliminating a mandate to cut carbon emissions by 2030, and provide utilities like Duke Energy Corp. flexibility to recover some costs of ongoing construction projects such as nuclear plants.
The legislation filed by Senate leader Phil Berger (R) would overturn key provisions of 2021's House Bill 951, which aimed to speed the retirement of coal-fired units in the state and directed the North Carolina Utilities Commission to "take all reasonable steps" to reach a 70% reduction of carbon emissions by 2030 from 2005 levels, as well as carbon neutrality by 2050. The original legislation placed responsibility on regulators to determine the generation mix that would accomplish those goals while keeping costs low, including for Duke, the state's largest electricity generator.
The new proposal, Senate Bill 261, eliminates the 70% carbon reduction mandate. The bill passed its first committee March 11, a day after it was filed, and was referred to a second, the Committee on Rules and Operations of the Senate.
The bill is co-sponsored by Sen. Paul Newton (R), a former Duke executive who advocated for the previous legislation. The goal of carbon neutrality by 2050 remains under the new proposal.
Berger referred to the 2030 mandate in a news release as an "arbitrary benchmark" that could lead to higher electricity rates and said the new legislation provides more flexibility for utilities to "select and construct new and affordable energy generation resources, like nuclear power."
State regulators have already extended flexibility to Duke on generation planning through a settlement agreement for a resource plan in November 2024, allowing leeway to stop modeling for the 70% goal and to add significant gas generation. By accepting the settlement, North Carolina regulators effectively waived Duke's requirement to model 70% carbon reduction by 2030, aiming instead for 2032. The order directed Duke to continue to pursue "all reasonable steps" to reach a 70% carbon reduction "by the earliest possible date."
Cost recovery for ongoing projects
The proposed legislation also would give Duke more freedom to include the cost of new baseload generation in customer rates while the projects are under construction.
The bill could allow Duke to include annual cost recovery of financing costs in base rates outside of the typical rate-making processes if regulators determine "there is an overall cost-savings for customers over the life of the generating facility." Berger mentioned potential new nuclear plants specifically in his news release.
In its current form, the legislation does not address what happens if utilities recover costs during construction of a project that goes unfinished, as happened with the abandoned V.C. Summer nuclear expansion effort in South Carolina.
Duke has included new nuclear in its generation plans for the Carolinas, including $440 million in early development costs for nuclear expansion with a goal of 300 MW by 2034 and a total of 600 MW by 2035. State regulators also directed Duke to study and include in its modeling the potential for additional light-water reactors such as the AP1000 "should the resource be cost effective." The regulators noted that Duke holds a combined license for its W.S. Lee coal- and gas-fired plant and that the Shearon Harris Nuclear Power Plant has space and adequate water to support additional units.
Duke joined an application in January for $800 million in US Energy Department grant funds for small modular nuclear reactor (SMR) development, led by the Tennessee Valley Authority, for construction of what could be the first utility-scale SMR in the US using GE-Hitachi Nuclear Energy Inc.'s BWRX-300 design. At the same time, Duke announced it had forged an agreement with GE-Hitachi to invest in the standard design and licensing for the BWRX-300 reactor, though the company has not yet identified a specific technology it may use for its own project.
Duke plans to file an early site permit for an SMR project with the US Nuclear Regulatory Commission, likely in the third or fourth quarter of this year, at the site of its Belews Creek Nuclear Plant.
