Data center bill targets rates, water, incentives
A bill filed in the General Assembly would require large data centers to pay the full cost of their electricity, water use and infrastructure, while meeting new on-site clean energy and environmental standards.
Cory Vaillancourt photo
As North Carolina braces against a surge in large-scale data center development, a new bill filed by Rep. Lindsey Prather (D-Buncombe) aims to redraw the rules governing how those facilities use electricity, consume water and tap into public subsidies.
In filing the bill, Prather noted that she was inspired by a 12-month moratorium passed in the Town of Canton in February, but also that the bill was “crowd-sourced.”
“I continue to get emails and phone calls from constituents that are worried and want to know what the state is doing about it,” Prather told The Smoky Mountain News April 29. “There's just a lot of fear and misunderstanding, and when there's a lack of data and transparency, it's easy for that stuff to spread.”
House Bill 1063, titled the “Ratepayer and Resource Protection Act,” proposes sweeping changes to state utilities law, environmental regulation and economic development policy. Its central premise is simple but far-reaching — data centers should pay the full cost of the infrastructure they require rather than shifting those costs onto everyday utility customers.
At the heart of the legislation is a new regulatory framework for what the bill defines as “large data centers,” facilities with projected peak electricity demand of at least 40 megawatts or annual water use exceeding one billion liters. Those thresholds capture the kind of hyperscale operations increasingly drawn to North Carolina for its land availability, tax structure and growing energy capacity.
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Before construction could begin, developers would be required to submit detailed disclosure statements outlining projected energy use, water consumption and cooling technologies. They would also need to secure a certificate of operation from the North Carolina Utilities Commission, demonstrating financial capability and compliance with a range of new standards.
Among the most consequential requirements is a mandate that large data centers install enough on-site clean energy generation to offset at least 25% of their projected peak electricity demand. The bill explicitly rejects the use of renewable energy credits or off-site agreements to meet that requirement, instead prioritizing physical generation capacity connected directly to the facility.
“North Carolina could and should be a leader in clean energy,” she said. “These are obviously projects that have the potential to use a ton of energy, so we just want to make sure that we're getting in there early and ensuring that that some of that energy is going to be clean.”
The Utilities Commission would retain authority to increase that threshold if necessary to maintain grid reliability or protect other customers from rate increases. That concern — shielding ratepayers — runs throughout the bill. Utilities would be required to develop new rate structures ensuring that data centers cover the full marginal cost of serving their demand, including any new generation, transmission or distribution infrastructure.
If standard rates fail to capture those costs, the commission could require special high-capacity contracts negotiated directly between utilities and data center operators, again with the goal of preventing cost-shifting onto residential and small-business customers.
The bill also addresses the risk of so-called “stranded costs,” where utilities invest heavily in infrastructure for a large customer that later reduces usage or shuts down. Under the proposal, data centers — not ratepayers — would bear that financial risk.
Water use represents another major focus. The legislation directs the Department of Environmental Quality to establish new statewide standards for data center water consumption, including a requirement to maximize the use of closed-loop or reclaimed water systems.
Notably, the bill would prohibit evaporative cooling systems, a common but water-intensive method used to regulate temperatures in large computing facilities. That provision reflects growing concern about the strain such operations can place on local water supplies, particularly in regions already facing resource constraints.
Transparency requirements would also increase. Operators of large data centers would need to file annual reports detailing electricity consumption, water usage and on-site energy generation, with those reports made publicly available.
Beyond utilities and environmental policy, the bill takes direct aim at the economic incentives that have historically attracted data centers to the state. Under the proposal, data centers would be barred from receiving infrastructure grants or other incentives funded by utility ratepayers. Local governments would also be prohibited from offering tax abatements, rebates or similar financial assistance specific to data center projects.
At the state level, the bill removes data centers from eligibility for key economic development programs, including grants and loans administered through the Department of Commerce. It also repeals certain sales tax exemptions tied to data center equipment purchases, effective in 2027.
“I think we should have fewer exemptions anyway,” said Prather. “This was an opportunity. If we're crafting new legislation about something that we think is going to be coming here and growing in North Carolina, then now is the time to get in and go ahead and take them off of that exemption list.”
Taken together, those provisions could represent a significant shift in how North Carolina courts and regulates the data center industry.
Critics, however, have increasingly questioned whether those benefits justify the infrastructure demands and public subsidies involved — particularly as facilities grow larger and more resource-intensive.
The bill’s language reflects that skepticism, emphasizing the need to protect “households, small businesses, and local governments” from rising utility costs linked to data center expansion.
In addition to its data center-specific provisions, the legislation includes broader changes to utility regulation. It modifies how fuel costs are recovered by electric utilities and expands requirements for performance-based regulation, including new incentives tied to affordability and efficiency outcomes.
The measure also includes appropriations totaling $740,000 in recurring annual funding to support implementation, split between the Department of Environmental Quality and the Utilities Commission.
If enacted, most provisions would take effect July 1, setting the stage for a new regulatory landscape just as demand for data infrastructure continues to accelerate.
Whether the bill gains traction in the General Assembly remains to be seen. Data centers have become a politically complex issue, sitting at the intersection of economic development, environmental stewardship and consumer protection.
Prather cautions that she’s not explicitly anti-data center and that if the General Assembly wanted to ban data centers outright, it could. However, Prather’s proposal makes clear that the conversation is more about how to manage their impact — if, and when, they do arrive.
“Businesses are coming to North Carolina. I'm not worried that they're going to stop coming to North Carolina,” she said. “We are going to continue to grow, and this bill would not change that. What it would do is provide more predictability, more consistency and more transparency for folks when we're having these discussions.”
Canton isn’t the only place where data center moratoriums have sprung up over the past few years — the Town of Clyde approved a 12-month moratorium after unanimous public opposition, Cherokee County’s experience with a high-energy crypto facility has become a regional cautionary tale, Haywood County adopted a High Impact Development Ordinance to tightly regulate such projects in unincorporated areas and Waynesville has explored its own zoning and infrastructure constraints as officials weigh how to limit or shape any future proposals.
Prather’s bill passed its first reading in the House and has been sent to the House rules committee.
Anthony Penland, Prather’s Republican opponent in the 2026 General Election, did not respond to multiple calls for comment.
