Gov. Josh Stein has vetoed a bill that seeks to remove an interim carbon dioxide reduction target, in part citing a new analysis that shows doing so could lead to billions more dollars in fuel costs over the coming decade.
"This summer’s record heat and soaring utility bills has shown that we need to focus on lowering electricity costs for working families — not raising them. And as our state continues to grow, we need to diversify our energy portfolio so that we are not overly reliant on natural gas and its volatile fuel markets," Stein wrote in his veto message for Senate Bill 266.
The legislation includes a provision removing an interim carbon dioxide reduction target that was part of 2021's House Bill 951, a change that could lead Duke to build more natural gas plants and run existing ones more frequently to meet rising demand in the 2030s instead of building additional solar and wind.
Stein went on to point to a recent memo from N.C. State University researchers that shows buying that extra natural gas could largely eliminate projected savings from removing the interim target.
The problem is that using more gas means North Carolina's electricity rates are more vulnerable to shifts in natural gas markets, says the N.C. State team. If gas prices take a higher trajectory than is built into the original projections, ratepayers would end up paying more.
Fueling those plants could cost as much as $23 billion between now and 2050, the analysis found, or about $13 billion in present dollars.
"These additional fuel costs are borne directly by customers. Maintaining the interim goal helps limit exposure to volatile fuel markets and protects ratepayers from sharp increases in electricity bills," the N.C. State team wrote.
An earlier analysis from North Carolina's Public Staff, the state agency that represents ratepayers in front of the state Utilities Commission, found that removing the target would push Duke to build more natural gas plants in the 2030s instead of renewable resources like solar and wind.
Doing that and assuming a middle-ground price for natural gas would result in about $13 billion in savings through 2050, Public Staff told legislators, with the whole system costing about $137 billion.
Republican lawmakers cited the report when garnering support for Senate Bill 266 in the N.C. House of Representatives and for Senate Bill 261, an earlier version that also struck the interim target, in the N.C. Senate.
If fuel costs take a more expensive trajectory, they have the potential to largely eliminate the savings Public Staff projected from removing the interim target, said Joseph DeCarolis, a professor in N.C. State's Department of Civil, Construction and Environmental Engineering who worked on the analysis.
"The idea that you can do a single model run and then assume that you're just going to save $13 billion, that's not how the real world works. There's a lot of uncertainty, and if you want to be able to capture that uncertainty, you need to do more model runs," said DeCarolis, who served as administrator of the U.S. Energy Information Administration under President Joe Biden.
In addition to DeCarolis, Anderson de Queiroz and Jeremiah Johnson — both professors in the engineering school — worked on the memo.
The interim target is a 70% carbon dioxide reduction from 2025 levels, albeit with the N.C. Utilities Commission having the latitude to delay the requirement that Duke meet the target as long as it was pursuing a nuclear plant or offshore wind farm.
The Utilities Commission has shown a willingness to take Duke up on that offer, so far pushing the date for the utility to meet the interim target back to 2034.
Stein's veto message also pointed to the message that removing the interim target sends, namely to businesses that are part of the low- or no-carbon economy or businesses that are seeking carbon-free energy to meet their own corporate targets.
"This bill walks back our state’s commitment to reduce carbon emissions, sending the wrong signal to businesses that want to be a part of our clean energy economy. My job is to do everything in my power to lower costs and grow the economy. This bill fails that test," Stein wrote.
He also pointed to a provision that tweaks how fuel costs are apportioned to shift millions of dollars in annual bills from commercial and industrial customers to residential customers.
Impacts of different gas projections
The N.C. State team evaluated three projected prices of natural gas that were included in the last Consolidated Carbon Plan and Integrated Resource Plan. Those included a high price of natural gas, a middle-ground reference price, and a low price.
The reference cost's additional roughly $14 billion in fuel costs is already built into Public Staff's $137 billion estimated cost to build out Duke's energy system between now and 2050.
If natural gas costs are low, ratepayers could save an additional $3 billion.
But what the N.C. State team is warning about is a scenario where natural gas costs are high and the interim target is removed, resulting about $23 billion in additional fuel costs. That would push the cost of the total buildout to about $146 billion between now and 2050.
"That can largely wipe out the benefit you get, the savings that you get from removing the interim target," DeCarolis said.
DeCarolis said Public Staff did what they were asked, running the analysis that was requested of them by the General Assembly. But legislators should, he said, consider a wider suite of scenarios before changing state policy.
A Duke Energy spokesman declined to comment on the memo, but company officials have previously said S.B. 266 will help keep costs low and support the development of resources that can be called upon at all times to support the state's economic growth.
Jay Morrison, the chief legal and external affairs officer for ElectriCities, said in a statement that federal actions mean the cost of natural gas could swing the other way, going down instead of up. ElectriCities represents more than 70 publicly owned power systems in North Carolina.
Gas, Morrison said, is likely to remain competitive for the rest of this decade while solar and wind prices could rise, in part due to the impact of provisions in the One Big Beautiful Bill and other shifts in the policy landscape.
"We can’t let a worst-case scenario derail a policy that stands to save customers $13 billion under the most likely conditions. Senate Bill 266 is grounded in the best available data and serves North Carolinians by prioritizing affordability and reliability," Morrison said in his statement.
Memo circulated days before Stein's veto
The memo circulated days before Stein needed to decide whether to veto S.B. 266. There had been rumors that the governor was considering vetoing the bill, and Stein had made clear to legislative Republicans that he was not in favor of removing the interim target.
Tuesday afternoon, Senate President Pro Tempore Phil Berger posted a message to the social media platform X urging Stein to sign S.B. 266 into law.
"We can't let unrealistic Green New Deal 'goals' impede reality. Senate Bill 266 will save North Carolinians an estimated $15 billion by removing arbitrary carbon reduction goals and prioritizing reliable, least-cost energy sources," wrote Berger, R-Rockingham.
In recent weeks, Berger has discussed how he hopes the legislation helps spur Duke Energy to build large nuclear reactors, namely Westinghouse AP1000s.
On the flip side, environmental groups have pointed to the memo as a reason for Stein to veto.
In a statement, Chris Herndon, the chapter director of the N.C. Sierra Club, said it confirms the concerns some groups had about the legislation's impact on prices.
"It's cruel and wrong to allow any company to place a $23 billion energy burden on families already suffering under crippling inflation. We again ask Governor Stein to do what the legislature hasn't done: Protect and serve our families and communities by vetoing this harmful bill," Herndon wrote.
Matt Abele, the N.C. Sustainable Energy Association's executive director, told the N.C. Newsroom that the interim target helps Duke, the Utilities Commission and groups like his own keep a focus on deploying the technologies that are already available.
To Abele, that means adding wind and solar to meet demand. Without building those, Abele said, North Carolina risks under-investing in total generating resources or over-investing in resources like large nuclear plants that could see costs quickly mount.
"Essentially, you're flying blind into the future without those interim planning targets and removing one of the filters or lenses that the Utilities Commission uses right now to evaluate the generation resources that are necessary for customers," Abele said.
State law directs the Utilities Commission to consider affordability, reliability and carbon dioxide reductions when directing Duke's electric grid investment.
Scaling back the construction of solar and wind resources in the early 2030s, DeCarolis said, means more things need to go right for Duke Energy to reach the net zero by 2050 target that remains part of state law.
"There's a lot of things that need to happen post-2030 if you don't have the interim target. And the more you delay the deployment of clean energy technology that's going to get you to that carbon target, the higher the risk is that at some point Duke and/or the Utilities Commission just say look, this is no longer feasible," DeCarolis said.
Republicans hold a supermajority in the state Senate, allowing them to override Stein's vetoes when everyone is present and voting. Berger, the Senate leader, posted a statement to X on Wednesday calling Stein a "Green New Deal Radical" and saying he looks forward to overriding the veto in the Senate.
In the House, Republicans would need one Democrat to side with them when everyone is present and voting to override Stein's vetoes. When the House approved Senate Bill 266, 11 Democrats voted for it.
Speaker of the House Destin Hall, R-Caldwell, posted on social media that he is "disappointed" in Stein's veto and pointed to the Democrats who supported it in that chamber.
"Considering the strong bipartisan support in both chambers, we anticipate overriding this veto," Hall wrote.
