Energy Security and Affordability Act.

GENERAL ASSEMBLY OF NORTH CAROLINA
SESSION 2025
S 1
SENATE BILL 261

Short Title: Energy Security and Affordability Act. (Public)
Sponsors: Senators Berger, P. Newton, and Barnes (Primary Sponsors).
Referred to: Agriculture, Energy, and Environment
March 11, 2025
*S261-v-1*
A BILL TO BE ENTITLED 1
AN ACT TO ELIMINATE THE INTERIM DATE FOR CARBON REDUCTION BY 2
CERTAIN ELECTRIC PUB LIC UTILITIES AND TO ALLOW AN ALTERNATIV E 3
COST RECOVERY MECHANISM FOR CONSTRUCTION WORK IN PROGRESS FOR 4
BASELOAD ELECTRIC GENERATING FACILITIES. 5
The General Assembly of North Carolina enacts: 6
SECTION 1.(a) G.S. 62-110.9 reads as rewritten: 7
"§ 62 -110.9. Requirements concerning reductions in emissions of carbon dioxide from 8
electric public utilities. 9
The Utilities Commission shall take all reasonable steps to achieve a seventy percent (70%) 10
reduction in emissions of carbon dioxide (CO2) emitted in the State from electric generating 11
facilities owned or operated by electric public utilities from 2005 levels by the year 2030 and that 12
result in carbon neutrality by the year 2050. For purposes of this section, (i) "electric public 13
utility" means any electric public utility as defined in G.S. 62-3(23) serving at least 150,000 14
North Carolina retail jurisdictional customers as of January 1, 2021, and (ii) "carbon neutrality" 15
means for every ton of CO2 emitted in the State from electric generating facilities owned or 16
operated by or on behalf of electric public utilities, an equivalent amount of CO2 is reduced, 17
removed, prevented, or offset, provided that the offsets are verifiable and do not exceed five 18
percent (5%) of the authorized reduction goal. In achieving the authorized carbon reduction 19
goals, goal, the Utilities Commission shall: 20
(1) Develop a plan, no lat er than December 31, 2022, 2026, with the electric 21
public utilities, including stakeholder input, for the utilities to achieve the 22
authorized reduction goals, goal of carbon neutrality by the year 2050, which 23
may, at a minimum, consider power generation, transmission and distribution, 24
grid modernization, storage, energy efficiency measures, demand -side 25
management, and the latest technological breakthroughs to achieve the least 26
cost path consistent with this section to achieve compliance with the 27
authorized carbon reduction goals goal (the "Carbon Plan"). The Carbon Plan 28
shall be reviewed every two years and may be adjusted as necessary in the 29
determination of the Commission and the electric public utilities. 30
(2) Comply with current law and practice with res pect to the least cost planning 31
for generation, pursuant to G.S. 62-2(a)(3a), in achieving the authorized 32
carbon reduction goals goal and determining generation and resource mix for 33
the future. Any new generation facilities or other resources selected by t he 34
Commission in order to achieve the authorized reduction goals goal for 35
General Assembly Of North Carolina Session 2025
Page 2 Senate Bill 261-First Edition
electric public utilities shall be owned and recovered on a cost of service basis 1
by the applicable electric public utility except that: 2
a. Existing law shall apply with respect to energy efficiency measures 3
and demand-side management. 4
b. To the extent that new solar generation is selected by the Commission, 5
in adherence with least cost requirements, the solar generation selected 6
shall be subject to the following: (i) forty -five percent (45%) of the 7
total megawatts alternating current (MW AC) of any solar energy 8
facilities established pursuant to this section shall be supplied through 9
the execution of power purchase agreements with third parties 10
pursuant to which the electric public u tility purchases solar energy, 11
capacity, and environmental and renewable attributes from solar 12
energy facilities owned and operated by third parties that are 80 MW 13
AC or less that commit to allow the procuring electric public utility 14
rights to dispatch, op erate, and control the solicited solar energy 15
facilities in the same manner as the utility's own generating resources 16
and (ii) fifty -five percent (55%) of the total MW AC of any solar 17
energy facilities established pursuant to this section shall be supplied 18
from solar energy facilities that are utility -built or purchased by the 19
utility from third parties and owned and operated and recovered on a 20
cost of service basis by the soliciting electric public utility. These 21
ownership requirements shall be applicable to solar energy facilities 22
(i) paired with energy storage and (ii) procured in connection with any 23
voluntary customer program. 24
(3) Ensure any generation and resource changes maintain or improve upon the 25
adequacy and reliability of the existing grid. 26
(4) Retain discretion to determine optimal timing and generation and 27
resource-mix to achieve the least cost path to compliance with the authorized 28
carbon reduction goals, goal, including discretion in achieving the authorized 29
carbon reduction goals goal by the dates date specified in order to allow for 30
implementation of solutions that would have a more significant and material 31
impact on carbon reduction; provided, however, the Commission shall not 32
exceed the dates date specified to achieve the authorized carbon r eduction 33
goals goal by more than two years, except in the event the Commission 34
authorizes construction of a nuclear facility or wind energy facility that would 35
require additional time for completion due to technical, legal, logistical, or 36
other factors beyond the control of the electric public utility, or in the event 37
necessary to maintain the adequacy and reliability of the existing grid. In 38
making such determinations, the Utilities Commission shall receive and 39
consider stakeholder input." 40
SECTION 1.(b) G.S. 62-110.1 reads as rewritten: 41
"§ 62-110.1. Certificate for construction of generating facility; analysis of long-range needs 42
for expansion of facilities; ongoing review of construction costs; inclusion of 43
approved construction costs in rates. 44
… 45
(e) As a condition for receiving a certificate, the applicant shall file an estimate of 46
construction costs in such detail as the Commission may require. The Commission shall hold a 47
public hearing on each application and no certificate shall be granted unless the Commission has 48
approved the estimated construction costs and made a finding that construction will be consistent 49
with the Commission's plan for expansion of electric generating capacity. A certificate for the 50
construction of generating facility by an elect ric public utility, as that term is defined by 51
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Senate Bill 261-First Edition Page 3
G.S. 62-110.9, shall be granted only if the applicant demonstrates and the Commission finds that 1
the facility is part of the least cost path to achieve compliance with the authorized carbon 2
reduction goals goal in G.S. 62-110.9, will maintain or improve upon the adequacy and reliability 3
of the existing grid, and that the construction and operation of the facility is in the public interest. 4
In making its determination, the Commission shall consider resource a nd fuel diversity and 5
reasonably anticipated future operating costs. Once the Commission grants a certificate, no 6
public utility shall cancel construction of a generating unit or facility without approval from the 7
Commission based upon a finding that the construction is no longer in the public interest. 8
…." 9
SECTION 2.(a) G.S. 62-133 reads as rewritten: 10
"§ 62-133. How rates fixed. 11
(a) In fixing the rates for any public utility subject to the provisions of this Chapter, other 12
than bus companies, motor carri ers and certain water and sewer utilities, the Commission shall 13
fix such rates as shall be fair both to the public utilities and to the consumer. 14
(b) In fixing such rates, the Commission shall: 15
(1) Ascertain the reasonable original cost or the fair value under G.S. 62-133.1A 16
of the public utility's property used and useful, or to be used and useful within 17
a reasonable time after the test period, in providing the service rendered to the 18
public within the State, less that portion of the cost that has been con sumed 19
by previous use recovered by depreciation expense. In addition, construction 20
work in progress may be included in the cost of the public utility's property 21
under any of the following circumstances: 22
a. To the extent the Commission considers inclusion in the public interest 23
and necessary to the financial stability of the utility in question, 24
reasonable and prudent expenditures for construction work in progress 25
may be included, subject to the provisions of subdivision (4a) of this 26
subsection. 27
b. For basel oad electric generating facilities, reasonable and prudent 28
expenditures shall be included pursuant to subdivisions (2) or (3) of 29
G.S. 62-110.1(f1), whichever applies, subject to the provisions of 30
subdivision (4a) of this subsection. 31
c. For baseload electric generating facilities, if the Commission 32
determines there is an overall cost-savings for customers over the life 33
of the generating facility and a baseload electric generating facility has 34
been subject to an annual ongoing review proce ss pursuant to 35
G.S. 62-110.1(f), the Commission shall, upon determining through the 36
ongoing review process tha t the expenditures were reasonably and 37
prudently incurred, allow an increase in base rates outside of the 38
rate-making processes established under this section or 39
G.S. 62-133.16 to reflect solely the inclusion of such construction 40
work in progress in the rate base, with the increase being effective 30 41
days after the Commission 's order finding that the expenditures w ere 42
reasonable and prudent. 43
… 44
(4a) Require each public utility to discontinue capitalization of the composite 45
carrying cost of capital funds used to finance construction (allowance for 46
funds) on the construction work in progress included in its rate based upon the 47
effective date of the first and each subsequent general rate order issued with 48
respect to it after the effective date of this subsection; allowance for funds may 49
be capitalized with respect to expenditures for construction work in progress 50
not inc luded in the utility's property upon which the rates were fixed. In 51
General Assembly Of North Carolina Session 2025
Page 4 Senate Bill 261-First Edition
determining net operating income for return, the Commission shall not include 1
any capitalized allowance for funds used during construction on the 2
construction work in progress included in the utility's rate base. 3
… 4
(c) The original cost of the public utility's property, including its construction work in 5
progress, shall be determined as of the end of the test period used in the hearing and the probable 6
future revenues and expenses shall be based on the plant and equipment in operation at that time. 7
If the public utility elects to establish rate base using fair value, the fair value determination of 8
the public utility's property shall be made as provided in G.S. 62-133.1A, and the probable future 9
revenues and expenses shall be based on the plant and equipment in operation at the end of the 10
test period. The test period shall consist of 12 months' historical operating experience prior to the 11
date the rates are proposed to become effective, but the Commission shall consider such relevant, 12
material and competent evidence as may be offered by any party to the proceeding tending to 13
show actual changes in costs, revenues or the cost of the public utility's property used and useful, 14
or to be used and u seful within a reasonable time after the test period, in providing the service 15
rendered to the public within this State, including its construction work in progress, which is 16
based upon circumstances and events occurring up to the time the hearing is closed. 17
…." 18
SECTION 2.(b) G.S. 62-110.1 reads as rewritten: 19
"§ 62-110.1. Certificate for construction of generating facility; analysis of long-range needs 20
for expansion of facilities; ongoing review of construction costs; inclusion of 21
approved construction costs in rates. 22
… 23
(f1) The Except as provided in G.S. 62-133(b)(1)c., the public utility shall recover through 24
rates in a general rate case conducted pursuant to G.S. 62-133 the actual costs it has incurred in 25
constructing a generating facility in reliance on a certificate issued under this section as provided 26
in this subsection, unless new evidence is discovered (i) that could not have been discovered by 27
due diligence at an earlier time and (ii) that reasonably tends to show that a previous 28
determination by the Commission that a material item of cost was just and reasonable and 29
prudently incurred was erroneous. If the Commission determines that evidence has been 30
submitted that meets the requirements of this subsection, the public utility shall have the burden 31
of proof to demonstrate that the material item of cost was in fact just and reasonable and prudently 32
incurred. 33
(1) When a facility has been completed, and the construction of the facility has 34
been subject to ongoing review under subsection (f) of this se ction, the 35
reasonable and prudent costs of construction approved by the Commission 36
during the ongoing review shall be included in the public utility's rate base 37
without further review by the Commission. 38
(2) If a facility has not been completed, and the con struction of the facility has 39
been subject to ongoing review under subsection (f) of this section, the 40
reasonable and prudent costs of construction approved by the Commission 41
during the ongoing review shall be included in the public utility's rate base 42
without further review by the Commission. 43
(3) If a facility is under construction or has been completed and the construction 44
of the facility has not been subject to ongoing review under subsection (f) of 45
this section, the costs of construction shall be includ ed in the public utility's 46
rate base if the Commission finds that the incurrence of these costs is 47
reasonable and prudent. 48
(f2) If the construction of a facility is cancelled, including cancellation as a result of 49
modification or revocation of the certific ate under subsection (e1) of this section, and the 50
construction of the facility has been subject to ongoing review under subsection (f), absent newly 51
General Assembly Of North Carolina Session 2025
Senate Bill 261-First Edition Page 5
discovered evidence (i) that could not have been discovered by due diligence at an earlier time 1
and (ii) t hat reasonably tends to show that a previous determination by the Commission that a 2
material item of cost was just and reasonable and prudently incurred was erroneous, the public 3
utility shall recover through rates in a general rate case conducted pursuant to G.S. 62-133 or as 4
provided in G.S. 62-133(b)(1)c., the costs of construction approved by the Commission during 5
the ongoing review that were actually incurred prior to cancellation, amortized over a reasonable 6
time as determined by the Commission. In th e general rate case, case, or a proceeding under 7
G.S. 62-133(b)(1)c., the Commission shall make any adjustment that may be required because 8
costs of construction previously added to the utility's rate base pursuant to subsection (f1) of this 9
section are removed from the rate base and recovered in accordance with this subsection. Any 10
costs of construction actually incurred, but not previously approved by the Commission, shall be 11
recovered only if they are found by the Commission to be reasonable and pruden t. If the 12
Commission determines that evidence has been submitted that meets the requirements of this 13
subsection, the public utility shall have the burden of proof to demonstrate that the material item 14
of cost was just and reasonable and prudently incurred. 15
…." 16
SECTION 2.(c) G.S. 62-110.6 reads as rewritten: 17
"§ 62 -110.6. Rate recovery for construction costs of out -of-state electric generating 18
facilities. 19
(a) The Commission shall, upon petition of a public utility, determine the need for and, 20
if need is est ablished, approve an estimate of the construction costs and construction schedule 21
for an electric generating facility in another state that is intended to serve retail customers in this 22
State. 23
(b) The petition may be filed at any time after an application for a certificate or license 24
for the construction of the facility has been filed in the state in which the facility will be sited. 25
The petition shall contain a showing of need for the facility, an estimate of the construction costs, 26
and the proposed construction schedule for the facility. 27
(c) The Commission shall conduct a public hearing to consider and determine the need 28
for the facility and the reasonableness of the construction cost estimate and proposed construction 29
schedule. If the Commission finds that the construction will be needed to assure the provision of 30
adequate public utility service within North Carolina, the Commission shall approve a 31
construction cost estimate and a construction schedule for the facility. In making its 32
determinations under this section, the Commission may consider whether the state in which the 33
facility will be sited has issued a certificate or license for construction of the facility and approved 34
a construction cost estimate and construction schedule for the facility. The Co mmission shall 35
issue its order not later than 180 days after the public utility files its petition. 36
(d) G.S. 62-110.1(f) shall apply to the construction cost estimate determined by the 37
Commission to be appropriate, and the actual costs the public utility i ncurs in constructing the 38
facility shall be recoverable through rates in a general rate case pursuant to G.S. 62-133 as 39
provided in G.S. 62-110.1(f1).G.S. 62-110.1(f1), or as provided in G.S. 62-133(b)(1)c. 40
(e) If the construction of a facility is cancelle d, the public utility shall recover through 41
rates in a general rate case conducted pursuant to G.S. 62-133 G.S. 62-133, or as provided in 42
G.S. 62-133(b)(1)c., the costs of construction that were actually incurred prior to the cancellation 43
and are found by the Commission to be reasonable and prudent, as provided in subsections (f2) 44
and (f3) of G.S. 62-110.1." 45
SECTION 3. If any provision of this act or the application thereof to any person or 46
circumstances is held invalid, such invalidity shall not affect ot her provisions or applications of 47
this section that can be given effect without the invalid provision or application and, to this end, 48
the provisions of this section are declared to be severable. 49
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SECTION 4. This act is effective when it becomes law, and Section 2 of this act 1
applies to petitions for an increase to rates based on construction work in progress filed on or 2
after that date. 3