North Carolina Senate Bill 266

SB266 Overview

In the wake of this transformational shift in state energy policy, NCSEA remains committed to promoting the benefits of low-cost, reliable clean energy and ensuring that the state continues its trajectory toward achieving carbon neutrality by 2050.  

The bill was originally filed by now-retired Sen. Paul Newton as Senate Bill 261 “Energy Security and Affordability Act.” SB266 went through several iterations before being passed. Gov. Josh Stein vetoed the bill because of concerns about energy affordability. A study from NC State University shows removing the interim target set in HB951  “could cost ratepayers up to $23 billion in added fuel expenses through 2050.” In addition, the bill shifts 19% more of the fuel cost burden onto residential customers (from commercial and industrials), according to an analysis by EQ Research. Despite these studies, the legislature voted to override the governor’s veto of SB266 in July.   

Eliminates the interim date for carbon emissions reduction by Duke Energy

SB266 eliminates the 2030 interim carbon emissions reduction requirement in N.C. General Statute § 62-110.9, known as HB951, which was passed in 2021. HB951 required the NC Utilities Commission (NCUC) to take all reasonable steps to achieve a 70% reduction in emissions of carbon dioxide (CO2) in the state from Duke Energy from 2005 levels by 2030 and carbon neutrality by 2050. SB266 eliminates the interim requirement of a 70% reduction from 2005 levels by 2030. The 2050 carbon neutrality requirement remains in place.  

The NCUC had already exercised its discretion to waive the requirement that each Carbon Plan/Integrated Resources Plan (CPIRP) filed before 2030 include at least one resource portfolio that achieves the 70% reduction target. In the 2024 CPIRP Final Order on pages 84-85, the NCUC delayed compliance with the interim target of 70% emission reductions beyond 2030 and directed Duke Energy “to pursue ‘all reasonable steps’ to achieve the Interim Target by the earliest possible date.” This means that the NCUC was already no longer requiring Duke Energy to propose a plan that meets the 2030 interim requirement. , on pages 84-85, the NCUC delayed compliance with the interim target of 70% emission reductions beyond 2030 and directed Duke Energy “to pursue ‘all reasonable steps’ to achieve the Interim Target by the earliest possible date.”  

In August 2025, after the veto override of SB266, the NCUC issued an order superseding the interim target requirements and directed Duke Energy to cease modeling scenarios designed to achieve the interim target by the earliest possible date but to continue modeling scenarios to achieve the least cost path to carbon neutrality by 2050 while maintaining or improving upon the adequacy and reliability of the existing grid. 

Modifies construction work in progress (CWIP) for baseload electric generating facilities 

SB266 allows Duke Energy to increase electric rates outside of the normal ratemaking process at the NCUC and opens the door to further incentivize substantial utility investments in energy technologies that may never come online. This presents a potentially significant financial burden on ratepayers who will primarily bear the costs and risks of constructing these technologies at a time when North Carolina is already experiencing some of the highest electricity rate increases in the country.  

CWIP is a regulatory mechanism to record the costs of developing and building new baseload generating facilities (such as natural gas or nuclear power plants) and determines how the utility recovers those costs. Typically, a utility’s rate base includes the fair value of a utility’s property that is used and useful (i.e., in operation and benefiting customers), or to be used and useful within a reasonable time, and utility expenditures that were reasonable and prudent. CWIP was only included in the utility’s rate base if the NCUC determined that the inclusion of certain construction costs is “in the public interest and necessary to the financial stability of the utility.” Construction costs incurred by a utility for baseload electric generation facilities may be included in the rate base following the conclusion of the utility’s next general rate case, which normally occurs every three years. SB266 amends CWIP provisions to allow utilities to move the financing costs associated with constructing new baseload generating facilities into their rate base annually, subject to conditions. This change makes it highly likely that the financing costs for planned construction would be collected from ratepayers even if a facility is never built.    

This change in law shifts more risks onto ratepayers, and away from the utility and its shareholders, to cover the costs of constructing technologies that may be speculative (like small modular nuclear reactors) or have been subject to significant cost overruns throughout their development cycle (like the AP-1000 nuclear reactors deployed in Georgia). SB266 expands the scope of CWIP and may result in ratepayer subsidization of technologies that are not currently used and useful through customer rates.  

Other states in the Southeast have already learned this lesson the hard way, while ratepayers paid the price. Similar CWIP provisions in South Carolina led to ratepayers being on the hook for $9 billion in construction costs for a nuclear facility that was never completed due to higher-than-anticipated costs. North Carolina has already experienced some of the highest rate increases in the country over the past year, and approving another mechanism for the utility to further collect from ratepayers outside of the normal ratemaking process may exacerbate these rate hikes. A poll by Conservatives for Clean Energy (CCE) showed that 85% oppose this upfront customer financing model. 

Fuel cost recovery modifications 

SB266 will do nothing to address volatile fuel and fuel-related costs, a primary driver of residential rate increases since 2017 in Duke Energy’s North Carolina territory. A 2024 EQ Research report found that increases in fuel costs account for 68% of the residential rate increases in the Duke Energy Carolinas service territory and 46% of the residential rate increases in the Duke Energy Progress service territory.  

Rather than identifying a solution to reduce power bills, SB266 will shift certain fuel and fuel-related costs from commercial and industrial customers onto residential customers. SB266 represents an unreasonable cross-subsidy of large businesses’ power bills and an unfair allocation of energy costs onto residential customers. Multiple analyses have confirmed that this section of the bill changes the way purchased power costs are allocated, including this analysis by EQ Research.  

Performance-based regulation changes 

SB266 creates an exception to the $500 million cap on new generation plants that can be included in a multiyear rate plan (MYRP). The exception will allow Duke Energy to include the costs of new natural gas plants in multiyear rate plans, even if they cost more than $500 million. The provision that SB266 alters was enacted to protect ratepayers and prevent significant rate increases while implementing an MYRP. This change will make it easier for Duke Energy to seek approval from the NCUC for expensive generation options by removing ratepayer protection.   

Codify securitization for costs to retire coal plants 

Securitization is a helpful financing tool that can help ratepayers save money and was previously authorized to reduce the cost burden of retiring outdated coal plants. SB266 codifies certain NCUC’s rules for securitization and increases the potential amount eligible for securitization of retiring coal plants from 50% to 100%.