Ratepayer and Resource Protection Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
H 1
HOUSE BILL 1063

Short Title: Ratepayer and Resource Protection Act. (Public)
Sponsors: Representatives Prather, Johnson-Hostler, Longest, and Helfrich (Primary
Sponsors).
For a complete list of sponsors, refer to the North Carolina General Assembly web site.
Referred to: Rules, Calendar, and Operations of the House
April 28, 2026
*H1063-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO REGULATE L ARGE-SCALE DATA CENT ERS IN ORDER TO PROT ECT 2
RATEPAYERS, WATER RE SOURCES, AND GRID RE LIABILITY; TO REQUIR E 3
ON-SITE CLEAN GENERA TION, COST-BASED RATES, INFRASTRUCTURE C OST 4
RESPONSIBILITY, DISC LOSURES, AND REPORTI NG FOR CERTAIN DATA 5
CENTERS; TO LIMIT STATE AND LOCAL INCENTIVES FOR DATA CENTERS; AND 6
TO MAKE RELATED CHANGES TO PUBLIC UTILITIES LAW. 7
Whereas, North Carolina's electric and water utility systems are essential public 8
services relied upon daily by households, small businesses, and local governments across the 9
State; and 10
Whereas, the rapid growth of large -scale data centers imposes unusually large and 11
concentrated demands on electric generation, transmission, distribution, and water infrastructure; 12
and 13
Whereas, when the extraordinary infrastructure and resource demands created by such 14
facilities are not fully borne by the facilities themselves, those costs are shifted onto residential 15
customers, small businesses, and local governments through higher utility rate s and increased 16
public expenditures, exacerbating cost-of-living pressures statewide; and 17
Whereas, existing economic development incentive programs were not designed to 18
subsidize facilities whose operations require outsized public investments in energy and water 19
infrastructure without proportionate public benefit; and 20
Whereas, the General Assembly is responsible for protecting North Carolinians from 21
rising utility bills and ensuring affordability by preventing cost -shifting, protecting ratepayers, 22
and ensuring that data centers bear the full cost of the energy, water, and infrastructure required 23
to support their operations; Now, therefore, 24
The General Assembly of North Carolina enacts: 25
26
REGULATION OF DATA CENTERS 27
SECTION 1.(a) Chapter 62 of the General Statutes is amended by adding a new 28
Article to read: 29
"Article 6C. 30
"Data Centers. 31
"§ 62-129. Definitions and application of terms. 32
For purposes of this Article, the following definitions apply: 33
General Assembly Of North Carolina Session 2025
Page 2 House Bill 1063-First Edition
(1) Data center. – A facility or group of co -located facilities under common 1
ownership or control used to house computer systems, servers, network 2
equipment, and associated infrastructure for the storage, processing, or 3
transmission of data. Facilities under common ownership or control, o r that 4
are operationally or contractually integrated, whether located on one or 5
multiple parcels, shall constitute one "data center" for purposes of determining 6
the applicability of any threshold, requirement, limitation, or fee pursuant to 7
this Article. 8
(2) Large data center. – A data center that (i) has a projected peak electricity 9
demand of 40 megawatts or greater or (ii) has a projected annual water 10
consumption in excess of one billion liters. 11
(3) On-site clean generation. – Electric generation that is both (i) directly 12
interconnected with a data center and (ii) produced by a clean energy facility 13
or clean energy resource as those terms are defined in G.S. 62-133.8. 14
"§ 62-129.1. Preconstruction disclosure; certificate to operate a large data center. 15
(a) Preconstruction Disclosure Statement. – Prior to beginning construction on any new 16
data center, the owner or operator o f a proposed data center shall submit a preconstruction 17
disclosure statement, in a form prescribed by th e Commission, to the Commission, the 18
Department of Environmental Quality, and each local government in whose jurisdiction the data 19
center would be sited. The preconstruction disclosure statement shall include all of the following 20
information, supported by clear and credible evidence: 21
(1) The projected peak electricity demand. 22
(2) The projected annual electricity consumption. 23
(3) The projected annual water consumption. 24
(4) A detailed description of any cooling technologies to be used in the operation 25
of the data center. 26
(5) A d etailed description of any on -site clean generation to be used in the 27
operation of the data center. 28
(b) Certificate of Operation for Large Data Centers . – No person shall begin the 29
construction or operation of a la rge data center without having applied for and obtained a 30
certificate of operation from the Commission. The application for a certificate to operate a large 31
data center shall be made in a form prescribed by the Commission and accompanied by the fee 32
required pursuant to G.S. 62-300(a)(18). The Commission may, after notice and an opportunity 33
for interested parties to be heard, issue a certificate to operate a large data center upon finding 34
that the applicant is fit, capable, and financially able to operate the large data center in accordance 35
with this Article. As a condition for the issuance and continuation of a certificate to operate a 36
large data center, the applicant shall demonstrate to the satisfaction of the Commission all of the 37
following: 38
(1) The large data center will operate in compliance with the on -site clean 39
generation requirement set forth in G.S. 62-129.2. 40
(2) The large data center will operate in compliance with the water use standards 41
for data centers adopted by the Department of Environmental Quality under 42
G.S. 143-355.5A. 43
(3) The large data center will purchase electric service from an electric public 44
utility in accordance with G.S. 62-129.3 or G.S. 62-129.4, as applicable, at 45
rates that are commensurate to the electric public utility's full marginal cost of 46
providing service to that large data center, including any incremental costs 47
incurred by the electric public utility to construct or expand generation 48
facilities, transmission and distribution lines, substations, and any other 49
infrastructure investments necessary to serve that large data center's projected 50
load. 51
General Assembly Of North Carolina Session 2025
House Bill 1063-First Edition Page 3
(4) The large data center will purchase water and sewer services at rates that are 1
commensurate to the full marginal cost of providing service to that large data 2
center by a unit of local government, as defined in G.S. 162A-201, or a water 3
or sewer utility , including any incremental costs incurred to construct or 4
expand water and wastewater systems. 5
(5) That other members of the using and consuming public will be held harmless 6
and protected from bearing any inc reased costs as a result of providing 7
electric, water, or sewer services to the large data center. 8
(6) That the applicant w ill operate the large data center in accordance with any 9
other requirement determined by the Commission to be necessary to protect 10
the public interest. 11
(c) Effective Date. – A certificate of operation shall be effective from the date issued by 12
the Commission unless otherwise specified and shall remain in effect until terminated either 13
under its own terms or until suspended or revoked by the Commission as provided in subsection 14
(d) of this section. 15
(d) Certificate Review; Suspension and Revocation. – Upon the request of an electric 16
public utility, the Public Staff, or a person having an interest in the large data center's operation, 17
the Commission may review the certificate to determine whether the owner or operator of the 18
large data center is conducting operations in compliance with this Article. After notice to the 19
large data center's owner or operator, the Commission may suspend the certificate and enter upon 20
a hearing to determine whether the certificate should be revoked. After the hearing, and for good 21
cause shown, the Commission may, in its discretion, reinstate a suspended certificate, continue a 22
suspension of a certificate, or revoke a certificate. 23
"§ 62-129.2. On-site clean generation requirement. 24
(a) No person shall begin operation of a large data center without installing s ufficient 25
on-site clean generation capacity to offset at least twenty-five percent (25%) of the data center's 26
projected peak electricity demand. Such generation capacity shall be operational upon the date 27
that the large data center commences commercial operations. No off -site renewable energy 28
credits, virtual power purchase agreements, or similar instruments may be credited toward 29
satisfying the on-site clean generation requirement under this section. 30
(b) The Commission may increase the minimum percentage of on -site clean generation 31
capacity that a large data center must maintain relative to its projected peak demand upon finding 32
that additional on-site clean generation is necessary to maintain the reliability of the electric grid 33
and protect other customers from rate increases and is otherwise consistent with the public 34
interest. 35
(c) The Commission may grant a variance to a large data center from the on -site clean 36
generation requirement upon finding that (i) strict compliance with the on -site clean generation 37
requirement would be technologically infeasible for the proposed large data center and (ii) the 38
applicant will implement equivalent grid mitigation measures at the applicant's expense. 39
"§ 62-129.3. Electric rates for large data centers. 40
(a) Each electric public utility shall file for Commission approval rates for the provision 41
of electric service to large data centers. The Commission may approve a tiered rate schedule that 42
includes different prices, terms, or conditions for different classes of large data centers based on 43
load requirements or other factors related to the costs of serving large data center customers. 44
(b) The Commission shall not approve a rate schedule filed under this section unless the 45
Commission finds that the rates are sufficiently designed to ensure all of the following: 46
(1) That large data center customers are responsible for the entire cost of any 47
capital investments or incremental operational expenses necessary for the 48
electric public utility to serve large data center customers. 49
(2) That other retail customers will be protected from (i) incurring any rate 50
increases as a result of serv ing large data center customers or (ii) assuming 51
General Assembly Of North Carolina Session 2025
Page 4 House Bill 1063-First Edition
additional risk associated with having to bear any stranded costs as a result of 1
large data center customers ceasing operations or else consuming less 2
electricity than initially requested. 3
"§ 62-129.4. Special high-capacity rates for large data centers. 4
(a) The Commission shall require a large data center to receive electric service under a 5
special high-capacity rate upon determining that rates approved under G.S. 62-129.3 would not 6
be commensurate with the electric public utility's full marginal cost of providing service to that 7
large data center, including any incremental costs that would be incurred by the electric public 8
utility to construct or expand generation facilities, transmission and distribution lines, 9
substations, and any other infrastructure investments necessary to serve that large data center 's 10
projected load. 11
(b) The Commission may establish by rule certain categories of large data centers that 12
would be required to receive electric service under a special high-capacity rate. 13
(c) Upon determination by the Commission that a special high -capacity rate is required, 14
an electric public utility shall negotiate in good faith with the owner or operator of a large data 15
center an agreement to provide electric service at such prices, terms, and conditions necessary to 16
compensate the electric public utility 's full marginal cost of providing service to the large data 17
center over the term of the agreement, subject to approval by the Commission. 18
(d) The Commission shall approve the special high -capacity rate fixed by contract 19
between an electric public utility and a large data center upon finding that the rate satisfies the 20
conditions set forth under G.S. 62-129.1(b) and is otherwise consistent with the public interest. 21
"§ 62-129.5. Exclusion from economic development incentive programs. 22
(a) Notwithstanding any other provision of law, data centers shall be ineligible to receive 23
any infrastructure grants or other incentives funded directly or indirectly by utility ratepayers. 24
(b) Notwithstanding any other provision of law, a local government shall not grant or 25
provide to a data center any local tax incentive, subsidy, or financial assistance, including 26
property tax abatements, deferrals, rebates, grants, or payments in lieu of taxes. Nothing in this 27
subsection prohibits local governments from providing generally availa ble services or 28
infrastructure on the same terms offered to similarly situated commercial or industrial users. 29
(c) Nothing in this section shall be construed to prohibit local governments from 30
exercising zoning or land use authority. 31
"§ 62-129.6. Annual report. 32
(a) Each person who owns or op erates a large data center shall file an annual report to 33
the Commission and the Department of Environmental Quality that provides the following 34
information regarding the large data center's operations during the prior year: 35
(1) The actual amount of electricity consumed. 36
(2) The actual amount of water used. 37
(3) The actual amount of electricity generated on-site. 38
(4) Data indicating t he efficiency of the cooling system, as quantified using 39
metrics approved by the Department of Environmental Quality. 40
(5) Any additional information requested by the Commission for purposes of 41
ensuring compliance with this Article. 42
(b) Annual reports filed by large data centers are public records, as defined in G.S. 132-1, 43
and shall be made readily available by the Commission on its website. 44
"§ 62-129.7. Rules. 45
Pursuant to G.S. 62-31, the Commission may adopt rules to implement the provisions of this 46
Article. In addition, the Commission shall adopt rules for verifying the amount of generation 47
capacity maintained by a large data center in accordance with the on -site clean generation 48
requirement in G.S. 62-129.2." 49
SECTION 1.(b) G.S. 62-300(a) is amended by adding a new subdivision to read: 50
General Assembly Of North Carolina Session 2025
House Bill 1063-First Edition Page 5
"(18) Two hundred fifty dollars ($250.00) with each application for a certificate to 1
operate a large data center filed pursuant to G.S. 62-129.1(b)." 2
SECTION 1.(c) The rate schedule required to be submitted for approval by the 3
Utilities Commission pursuant to G.S. 62-129.3, as enacted by subsection (a) of this section, shall 4
be submitted by the electric public utility no later than July 1, 2028. Effective January 1, 2029, 5
an electric public utility shall not provide electric service to a large data center except under the 6
terms of a rate schedule or special high -capacity rate approved by the Utilities Commission in 7
accordance with G.S. 62-129.3 or G.S. 62-129.4, as applicable. 8
9
WATER USE STANDARDS FOR DATA CENTERS 10
SECTION 2.(a) Article 38 of Chapter 143 of the General Statutes is amended by 11
adding a new section to read: 12
"§ 143-355.5A. Water use standards for data centers. 13
(a) The Department shall adopt rules establishing water use standards for data centers 14
regulated under Article 6C of Chapter 62 of the General Statutes to ensure the protection of 15
surface water and groundwater resources. The water use standards adopted by the Department 16
shall require data centers to employ closed -loop or reclaimed water systems to the maximum 17
extent practicable. 18
(b) The water use standards adopted by the Department shall not permit a data center to 19
use an evaporative cooling system. For purposes of this subsection, an "evaporative cooling 20
system" means any cooling system that consumes water through evaporation as a primary method 21
of heat rejection." 22
SECTION 2.(b) The Department of Environmental Quality shall adopt temporary 23
rules to implement the water use standards for data centers and shall adopt permanent rules to 24
replace the temporary rules. Temporary rules adopted in accordance with this section shall remain 25
in effect until permanent rules that replace the temporary rules become effective. 26
27
REPEAL SALES TAX EXEMPTION FOR DATA CENTERS 28
SECTION 3.(a) G.S. 105-164.3(47), 105 -164.3(79), 105 -164.3(201), 29
105-164.13(43a)b., 105-164.13(55), and 105-164.13(55a) are repealed. 30
SECTION 3.(b) This section becomes effective January 1, 2027, and applies to sales 31
made on or after that date. 32
33
EXCLUDE DATA CENTERS FROM STATE ECONOMIC DEVELOPMENT 34
INCENTIVES 35
SECTION 4.(a) Article 10 of Chapter 143B of the General Statutes is amended by 36
adding a new section to read: 37
"§ 143B-435.2. Ineligible projects. 38
Notwithstanding any other provision of law, data centers, as defined in G.S. 62-129, shall be 39
ineligible to receive any grant, loan, or other incentive provided under this Article." 40
SECTION 4.(b) G.S. 143B-437.01 reads as rewritten: 41
"§ 143B-437.01. Industrial Development Fund Utility Account. 42
… 43
(a1) Definitions. – The following definitions apply in this section: 44
… 45
(5) Eligible industry. – A company headquarters or a person engaged in the 46
business of air courier services, information technology and services, 47
manufacturing, or warehousing and wholesale trade. 48
(6) Information technology and services. – An industry in one of the following, 49
as defined by NAICS: 50
a. Data processing industry group 518. 51
General Assembly Of North Carolina Session 2025
Page 6 House Bill 1063-First Edition
b. Software publishers industry group 5112. 1
c. Computer systems design and related services industry group 5415. 2
d. An internet activity included in industry group 519130. 3
Information and technology services does not include the operation of data 4
centers, as defined in G.S. 62-129. 5
…." 6
7
FUEL COST RECOVERY MODIFICATIONS 8
SECTION 5. G.S. 62-133.2(d) reads as rewritten: 9
"(d) The Commission shall provide for notice of a public hearing with reasonable and 10
adequate time for investigation and for all intervenors to prepare for hearing. At the hearing the 11
Commission shall receive evidence from the utility, the Public Staff, and any intervenor desiring 12
to submit evidence, and from the public generally. In reaching its decision, the Commission shall 13
consider all evidence required under subsect ion (c) of this section as well as any and all other 14
competent evidence that may assist the Commission in reaching its decision including changes 15
in the cost of fuel consumed and fuel -related costs that occur within a reasonable time, as 16
determined by the Commission, after the test period is closed. The Commission shall incorporate 17
in its cost of fuel and fuel -related costs determination under this subsection the experienced 18
over-recovery or under -recovery of reasonable costs of fuel and fuel -related costs prudently 19
incurred by the electric public utility, during the test period, based upon the prudent standards set 20
pursuant to subsection (d1) of this section, in fixing an increment or decrement rider. Upon 21
request of the electric public utility, the Commission shall also incorporate in this determination 22
the experienced over-recovery or under-recovery of costs of fuel and fuel -related costs through 23
the date that is 30 calendar days prior to the date of the hearing, provided that the reasonableness 24
and prudence of these costs shall be subject to review in the utility's next annual hearing pursuant 25
to this section. The Commission shall use deferral accounting, and consecutive test periods, in 26
complying with this subsection, and the over-recovery or under-recovery portion of the increment 27
or decrement shall be reflected in rates for 12 months, notwithstanding any changes in the base 28
fuel cost in a general rate case. Any experienced over-recovery or under-recovery of reasonable 29
fuel and fuel-related costs prudently incurred shall accrue interest at the commercial paper rate 30
as identified by the Federal Reserve for A2/P2 nonfinancial issuers, or reasonable successor 31
thereto, on a weighted average basis over the applicable time period. The burden of proof as to 32
the c orrectness and reasonableness of the charge and as to whether the cost of fuel and 33
fuel-related costs were reasonably and prudently incurred shall be on the utility. The Commission 34
shall allow only that portion, if any, of a requested cost of fuel and fuel-related costs adjustment 35
that is based on adjusted and reasonable cost of fuel and fuel -related costs prudently incurred 36
under efficient management and economic operations. In evaluating whether cost of fuel and 37
fuel-related costs were reasonable and prud ently incurred, the Commission shall apply the rule 38
adopted pursuant to subsection (d1) of this section. To the extent that the Commission determines 39
that an increment or decrement to the rates of the utility due to changes in the cost of fuel and 40
fuel-related costs over or under base fuel costs established in the preceding general rate case is 41
just and reasonable, the Commission shall order that the increment or decrement become 42
effective for all sales of electricity and remain in effect until changed in a subsequent general rate 43
case or annual proceeding under this section." 44
45
PERFORMANCE-BASED REGULATION CHANGES 46
SECTION 6.(a) G.S. 62-133.16 reads as rewritten: 47
"§ 62-133.16. Performance-based regulation authorized. 48
(a) Definitions. – For purposes of this section, the following definitions apply: 49
(1) "Affordability performance incentive mechanism " or "affordability PIM " 50
means a performance incentive mechanism that links electric public utility 51
General Assembly Of North Carolina Session 2025
House Bill 1063-First Edition Page 7
revenue or earnings to measurable reductions in customer energy burdens, 1
arrearages, disconnections, or other affordability outcomes, with a particular 2
focus on low-income customers, approved by the Commission. 3
(1)(1a) "Cost causation principle" means establishment of a causal link between a 4
specific customer class, ho w that class uses the electric system, and costs 5
incurred by the electric public utility for the provision of electric service. 6
(2) "Decoupling rate -making mechanism" means a rate -making mechanism 7
intended to break the link between an electric public utili ty's revenue and the 8
level of consumption of electricity on a per customer basis by its residential 9
customers. 10
(3) "Distributed energy resource" or "DER" means a device or measure that 11
produces electricity or reduces electricity consumption and is connected to the 12
electric distribution system, either on the customer's premises or on the 13
electric public utility's primary distribution system. A DER may include any 14
of the following: energy efficiency, distributed generation, demand response, 15
microgrids, energy storage, energy management systems, and electric 16
vehicles. 17
(4) "Earnings sharing mechanism" means an annual rate-making mechanism that 18
shares surplus earnings between the electric public utility and customers over 19
the period of time covered by a MYRP. 20
(4a) "Efficiency performance incentive mechanism" or "efficiency PIM" means a 21
performance incentive mechanism that links electric public utility revenue or 22
earnings to measurable improvements in system efficiency or cost 23
containment, including peak load reduction or efficient use of the system, 24
reductions in system loss, verified deferral or avoidance of capital 25
expenditures through non -wires alternatives , or other energy efficiency 26
outcomes approved by the Commission that exceed those already required by 27
State or federal law. 28
… 29
(c) Application. – An electric public utility shall be permitted to submit a PBR 30
application in a general rate case proceeding initiated pursuant to G.S. 62-133. A PBR application 31
shall include a decoupling rate -making mechanism, one two or more PIMs, and a MYRP, 32
including both an earnings sharing mechanism and proposed revenue requirements and base rates 33
for each of the years that a MYRP is in effect or a method for calculating the same. A PBR 34
application shall include, at a minimum, one affordability PIM and one efficiency PIM. The PBR 35
application may also include proposed tracking metrics with or without targets or benchmarks to 36
measure electric public utility achievement. The following additional requirements apply to a 37
PBR application: 38
… 39
(d) Commission Action on Application. – 40
(1) The Commission shall approve a PBR application by an electric public utility 41
only upon a finding that a proposed PBR would result in just and reasonable 42
rates, is in the public interest, and is consistent with the criteria established in 43
this section and rules adopted thereunder. In reviewing any such PBR 44
application under this section, the Commission sh all consider whether the 45
PBR application: 46
a. Assures that no customer or class of customers is unreasonably harmed 47
and that the rates are fair both to the electric public utility and to the 48
customer. 49
b. Reasonably assures the continuation of safe and relia ble electric 50
service. 51
General Assembly Of North Carolina Session 2025
Page 8 House Bill 1063-First Edition
c. Will not unreasonably prejudice any class of electric customers and 1
result in sudden substantial rate increases or "rate shock" to customers. 2
d. Incorporates, at a minimum, all of the following: (i) an affordability 3
PIM designed to reduce low -income energy burdens or other 4
affordability outcomes, (ii) an efficiency PIM designed to encourage 5
peak load reduction or efficient use of the system, encourage energy 6
efficiency, or otherwise reduce system costs in a manner that is 7
measurable, verifiable, and exceeds any comparable standard 8
otherwise required by State or federal law , and (iii) any performance 9
metrics, targets, and independent v erification protocols sufficient to 10
ensure that any awards or penalties reflect measurable performanc e 11
and to minimize gaming or cost-shifting. 12
(2) In reviewing any such PBR application under this section, the Commission 13
may consider whether the PBR application: 14
a. Encourages peak load reduction or efficient use of the system. 15
b. Encourages utility-scale clean energy and storage. 16
c. Encourages DERs. 17
d. Reduces low-income energy burdens. 18
e. Encourages energy efficiency. 19
f. Encourages carbon reductions. 20
g. Encourages beneficial electrification, including electric vehicles. 21
h. Supports equity in contracting. 22
i. Promotes resilience and security of the electric grid. 23
j. Maintains adequate levels of reliability, power quality, and customer 24
service. 25
k. Promotes rate designs that yield peak load reduction or beneficial 26
load-shaping. 27
…." 28
SECTION 6.(b) This section is effective when it becomes law and applies to any 29
rate-making mechanisms filed by an electric public utility on or after that date. 30
31
APPROPRIATIONS 32
SECTION 7.(a) There is appropriated from the General Fund to the Department of 33
Environmental Quality the sum of two hundred forty thousand dollars ($240,000) in recurring 34
funds beginning in the 2026-2027 fiscal year to be used for the adoption and implementation of 35
water use standards for data centers. 36
SECTION 7.(b) There is appropriated from the General Fund to the Utilities 37
Commission the sum of five hundred thousand dollars ($500,000) in recurring funds beginning 38
in the 2026-2027 fiscal year to be used for purposes consistent with this act. 39
40
EFFECTIVE DATE 41
SECTION 8. Except as otherwise provided, this act becomes effective July 1, 2026. 42