House Republicans have proposed a slate of rules governing development of data centers that use at least 100 megawatts of power in an effort they say is intended to protect electricity users from paying for development of the facilities and to protect against potential negative impacts.
"Everybody in the world is concerned about data centers making their rates go up, so we're being proactive to protect the ratepayers," Rep. Dean Arp, R-Union, who helped craft the new language, told the NC Newsroom.
The proposed committee substitute for Senate Bill 730 says that data centers that use at least 100 megawatts of power in a month must use closed-loop cooling systems to limit water consumption; need to conduct site assessments to determine the impact their noise could have on nearby homes and businesses; and prevent local governments from providing subsidies to data center developers to entice them to locate there.
The bill would also require that utility contracts with such data centers last at least 15 years with provisions meant to protect ratepayers if the contract is terminated or one of the parties defaults on the agreement. And it would mandate that contracts with data centers be designed so that the data center pays any costs associated with providing electricity to the facility.
Utilities like Duke would also need to file their contracts with data centers with the N.C. Utilities Commission and share them with the N.C. Public Staff. Duke or the data center developer would be able to designate those contracts as sensitive or confidential business information, keeping them out of public view.
And under a state-mandated long-range electricity generation plan filed with the Utilities Commission, the bill would require Duke to include an analysis of contracted demand for each data center versus its actual demand for each of the three previous years.
Last October, Duke officials told the N.C. Utilities Commission that data centers could make up as much as 80% of the energy the utility needs to add to support economic development projects in the coming years, even though the facilities only make up about 30% of the projects eyeing its North and South Carolina service territories.
"North Carolinians are facing rising electricity bills and this bill puts ratepayers first by requiring data centers to pay their own way, protecting our water resources, strengthening energy reliability and preventing cost shifts onto families and small businesses," Rep. Matthew Winslow, R-Franklin, told the committee.
Under the bill, local governments would be empowered to ask data centers to conduct site assessments looking at the facilities' impacts to ground and water resources, air quality, heat in the surrounding area, agricultural resources, parks, historic sites and nearby forests.
If local officials required those assessments, they would need to use them to determine whether a data center was consistent with its local ordinances and comprehensive land use plan.
Rep. Pricey Harrison, D-Guilford, has introduced several bills seeking to address data centers this session.
During Wednesday's committee meeting, Harrison praised the data center portion of the bill, saying, "I am so grateful for the work on the data centers and your thoughtful approach to this."
Re-examining 2050 net neutrality law
The bill would also direct the Legislative Services Office to issue a request for proposals for a study evaluating how efforts to reach North Carolina's goal of net zero carbon emissions laid out in 2021's House Bill 951 are impacting or could impact electric bills.
The goal, Arp said, is to find ways to lower power bills that have steadily risen in recent years.
"We don't want rigid adherence to something just because we passed it in the past. We want data to provide us the roadmap that helps us make important decisions, so one of them is what is the effect of the 2050 goal?" Arp said.
Last year, the General Assembly eliminated a 2030 target from that legislation of a 70% reduction in Duke Energy's 2025 carbon dioxide emissions by 2030.
Harrison did express concern about anything that would move North Carolina's power generation further away from the state's carbon neutrality goals.
"I appreciate anything we're doing to reduce energy bills, but I also am mindful that we've got this big, looming problem with climate that is changing. And it's affecting us now, and it's pretty serious," Harrison said.
The study would also look at what policies North Carolina could implement to limit the impacts of large electric customers, including potentially mandating that they generate some of their own electricity or that they limit use at certain times when demand is high across the grid.
The House Energy and Public Utilities Committee voted to approve the bill Wednesday, referring it to the House Rules Committee.
There was no public comment at Wednesday's meeting.
Banning local incentives
Local governments frequently provide data centers and other economic development projects with incentives, sometimes including property tax breaks. Arp's stance is that because utility rates are set statewide, the state government has an interest in determining what incentives should be available for the projects.
"Data centers affect the rates for everybody in North Carolina because of the demand. Therefore, we've got to settle that question at the state level and its impact. That's not just a local (question). No locality is an island unto themselves when you're talking about energy consumption," Arp said.
Rep. Ray Jeffers, R-Person, expressed concern that commissioners in his home county would not be able to offer incentives to Microsoft for its planned data center on a 1,350-acre megasite.
"We have not gotten to the point, the commissioners haven't gotten to the point of — the commissioners haven't gotten to the point of of what's going to be built, what's the investment and all of that. If this passes before then, then that will restrict them on possibly maybe even completing or actually coming to the site," Jeffers said.
The effort to ban local incentives is taking place as there is also an effort afoot to limit the type of state-level incentives that are available to data center developers.
Under existing state law, data centers that invest at least $75 million over five years receive sales and use tax exemptions on their construction materials, HVAC equipment, computer hardware and the electricity they purchase, among other items.
As part of the budget framework agreed to between House and Senate leadership last week, the General Assembly has agreed to roll back the exemption on electricity, with leaders in both chambers signaling they are open to exploring further cuts.
Each of Governor Josh Stein, a Democrat; Speaker of the House Destin Hall, R-Caldwell; and Senate leader Phil Berger has explained that they believe the tax cuts belong to an earlier time, when incentives were needed to spur data center development.
