- News media and Gov. Josh Stein argue that Senate Bill 266 will raise electricity rates, but they neglect to tell people that big rate hikes had been expected without the bill
- While they warn against the bill’s use of Construction Work in Progress (CWIP) to build new baseload power plants, they fail to mention that CWIP has been in state law since 2008 and that SB 266 adds new guardrails on its use
- Eliminating the Carbon Plan’s interim goal and using CWIP only if it results in cost savings to consumers over the lifetime of a facility should produce relative cost savings to electricity consumers, especially over the long term
In a bipartisan vote on July 29, the North Carolina General Assembly passed Senate Bill (SB) 266, “The Power Bill Reduction Act,” over Gov. Josh Stein’s veto. The bill eliminates the Carbon Plan’s interim goal of a 70 percent reduction in carbon dioxide emissions from electricity generation resources. It also allows electricity rate increases to pay for financing construction of a baseload electricity generating facility if doing so would result in an overall cost savings over the life of the facility.
Eliminating the Carbon Plan’s interim goal is a key recommendation from the “Power Plays” report from the John Locke Foundation’s Center for Food, Power, and Life (CFPL).
North Carolina news media are adamant that the law will raise electricity rates on consumers. Findings from the North Carolina Utilities Commission (NCUC) presented to legislators earlier this year, as well as research from the CFPL, however, show that keeping the interim goal would have resulted in great increases in consumer rates.
News coverage of the law has not been very informative, leaving certain details out that would upset the narrative pushed by the bill’s opponents, from Stein to solar interests and environmentalist groups. The News & Observer even relied on its outside funding partnership to produce its article (a disclaimer at the end of the article says it was “produced with financial support from the Hartfield Foundation and Green South Foundation, in partnership with Journalism Funding Partners”).
This brief will answer questions prompted by media reports and Stein’s veto.
Will SB 266 cause rates to rise?
This question is prompted by the opening sentence of The News & Observer’s piece, which cites opponents of the bill as saying it “will cause Duke Energy’s residential electric rates to rise while committing the utility to an over-reliance on fossil fuels for generations.” For this rise in rates, media and the governor cite a memorandum written by three NC State professors to claim that the bill “could cost North Carolina ratepayers up to $23 billion through 2050 due to higher fuel costs.” That one-page memo, however, focused on a worst-case scenario of natural gas price increases (discounting the reference and low-cost price scenarios), ignored possible changes in the resource mix the bill makes possible, and omitted savings in capital costs, transmission, and reliability.
The expectation prior to SB 266, however, was that, if no action were taken to eliminate the interim goal, consumers would be facing rapidly rising rates. Without that fact, readers are left misinformed.
In 2023, utilities engineer Dustin Metz of the NCUC’s Public Staff testified before the NCUC that “current rates will approximately double between now and the end of the company’s next rate case” (which would begin in 2026).
A 2022 analysis from the CFPL filed before the NCUC had estimated the cost impacts of the Carbon Plan under various portfolios of electricity generating resources put before the NCUC and showed that even a “Least Cost Decarbonization” portfolio would cost $107.9 billion by 2050. The costs of the actual portfolios then under consideration, however, were estimated to be significantly higher, between $141.7 billion and $162.3 billion.
A March 11, 2025, meeting of the state Senate Committee on Agriculture, Energy, and the Environment discussed the impact of the interim goal on NCUC resource modeling. Information from the Public Staff showed that this modeling without the interim goal —which SB 266 eliminates — would save electricity consumers $13 billion.
In short, the question is oversimplified. It’s not whether rates will increase. It’s whether they will increase less after SB 266 than they were going to before SB 266.
Does SB 266 use a new way to finance power plants?
Reports on SB 266 have also criticized the bill’s reliance on Construction Work in Progress (CWIP) for financing the building of new baseload power plants without letting readers know that North Carolina law has had CWIP since 2008. Readers are left with the impression that CWIP is a new finance mechanism. Instead, it is a preexisting mechanism for building nuclear power plants that SB 266 modified for also building baseload power plants, after placing more guardrails on using it.
CWIP was part of the law establishing what is now the Clean Energy and Energy Efficiency Portfolio Standards (CEPS). At the time, CWIP applied to (a) constructing new nuclear facilities if the NCUC considered it “in the public interest” and “necessary to the financial stability of the utility” and included only “reasonable and prudent expenditures for construction work” as well as (b) reasonable and prudent expenditures for constructing baseload electricity facilities.
Part of the stated concern over CWIP in SB 266 is that South Carolina and Georgia had used CWIP to raise consumers’ electricity rates to pay for constructing nuclear plants that “were never completed or were finished late and over budget.” Even under current North Carolina law, however, if a generating facility had been approved and had been subject to ongoing review by the NCUC but its construction was cancelled, the utility can still recover through customer rates all reasonable and prudent costs of construction.
Senate Bill 266 modifies CWIP for use in financing “baseload generating sources,” which essentially means new natural gas–fired facilities. Importantly — though not reported — it adds more caveats to the use of CWIP, which will ultimately be beneficial.
Now the NCUC must determine there to be an overall cost savings to customers over the life of the facility in order for CWIP to be used. Also, the facility must be subject to ongoing annual reviews by the NCUC to ensure its costs are “reasonably and prudently incurred.”
The idea is to save consumers costs over the long term by excluding from their rates, after the facility has been constructed, the full cost of the facility plus years of additional interest. It also contains a 2033 sunset of CWIP recovery of construction costs for baseload natural gas facilities.This change, in concert with eliminating the interim Carbon Plan goal and its unintended, highly expensive influence on resource modeling, should produce relative cost savings to electricity consumers, especially over the long term. Nevertheless, in keeping with a recommendation in our “Power Plays” report, legislators should maintain a watchful eye over how it performs.
