Commissioner Chang’s Dissent in Duke Energy Carolinas, LLC Docket Nos. ER26-2691-000 ER26-2691-001

Docket Nos. ER26-2691-000 ER26-2691-001

In today’s order, the Commission accepts Duke Energy Carolinas, LLC’s (DEC) proposed revisions to its pro forma Network Integration Transmission Service Agreement (NITSA)) to address increased network load growth and changing network resources, including an influx of large loads.  I dissent because DEC has not demonstrated that its Committed Revenue Contribution proposal adequately protects existing customers and is thus just and reasonable.  I also write separately because DEC’s filing highlights broader concerns regarding (1) the cost impact of Network Upgrades built to serve new large loads on other customers and (2) transparency around those cost impacts, both of which are critical to protecting existing customers from undue cost shifts.

Background

In response to changes it has observed in requests for network transmission service, DEC proposes a suite of reforms to update the rates, terms, and conditions reflected in its pro forma NITSA.  Among these changes, DEC proposes a set of specific reforms targeted at transmission service requests that are 100 MW or greater. 

As relevant here, DEC proposes a customer protection framework that: (1) establishes a 15-year transmission service obligation, based on a specified ramp schedule for the load serving entity (LSE) serving the new large load; and (2) requires that LSE to  commit to pay a minimum amount equal to 75% of the MW value in the load schedule for each month and year during that 15 year period, called the “Committed Revenue Contribution,” to be assessed as a shortfall payment if the LSE fails to meet those ramp schedule and revenue contributions.  Shortfall payments are credited against the transmission service revenue requirement borne by all of DEC’s transmission customers through its transmission formula rates. 

DEC also proposes to codify, in its pro forma NITSA, that costs of network upgrades for all transmission service requests – including those driven by large loads – will be rolled into transmission rates once those upgrades enter into service.  Furthermore, because DEC will rely on pro forma NITSAs, individual agreements will be reported to the Commission via its Electronic Quarterly Report (EQR) process unless a specific agreement is contested or does not conform to the pro forma NITSA.  As a result, the content of those agreements, including the Network Upgrades and associated costs, will not generally be filed at the Commission for review and public disclosure.

DEC Has Not Demonstrated that Its Committed Revenue Contribution Proposal Adequately Protects Customers Against the Risk of Cost Shifts

DEC bears the burden of establishing that its proposal – which (among other revisions) modifies its pro forma NITSA to create new rates, terms, and conditions of service for a specific class of transmission customers that take network service on behalf of large loads – is just and reasonable and not unduly discriminatory or preferential.  As discussed below, I do not believe DEC has carried that burden on the record before us, and I would reject DEC’s filing with guidance to improve or better support a refiled proposal. 

DEC’s Committed Revenue Contribution Proposal Does Not Include Sufficient Security Requirements to Protect Customers Against the Risk of Cost Shifts

As discussed below, DEC proposes to require long-term financial commitments from LSEs that serve large loads.  Directionally, DEC’s proposal is positive.  However, I would reject DEC’s proposal with guidance because it fails to include meaningful security requirements to backstop those long-term financial commitments and thus fails to adequately mitigate cost shifting risks. 

DEC’s proposed Committed Revenue Contribution framework requires LSEs serving new large loads to commit to paying at least 75% of a defined level of transmission service for 15 years, or to pay a shortfall payment if their actual NITS contribution falls below that minimum level.1  This arrangement essentially establishes a long-term take-or-pay arrangement with LSEs serving loads that exceed 100 MW, paid by LSEs through either transmission service or shortfall charges.  I conceptually support this kind of long-term payment obligation construct, which, if properly designed, can protect other transmission customers against the risk of cost shifting, particularly if large loads do not materialize as planned or terminate their service earlier than anticipated.2

However, not all long-term payment commitments are created equal, and the Commission has an obligation to assess, as part of its mandate to ensure just and reasonable rates, whether an FPA section 205 proposal adequately protects other customers.3 Here, DEC’s stated purpose for its Committed Revenue Contribution proposal (including the associated shortfall payment obligation) is to protect existing transmission customers against potential impacts from cost shifts for network upgrades needed to accommodate new large load additions.4  DEC’s filing acknowledges that large loads present a higher risk of shifting costs to other customers if the load does not materialize; indeed, that risk is the basis for the additional obligations being imposed on specific LSEs, including the Committed Revenue Contribution and associated shortfall payment requirements.5 

DEC’s stated goal is laudable, but I am not persuaded on this record that the proposal meets it.  DEC proposes to impose substantial 15-year payment obligations on specific LSEs that serve large loads, but proposes no specific security requirements to backstop those obligations.  Instead, it appears that DEC relies on the generally-applicable security provisions included in its pro forma NITSA, resulting in potential security obligations underpinning a 15-year revenue commitment on the order of a month of transmission revenues, or perhaps at most five months.6  If an LSE defaulted and could no longer pay an amount greater or equal to its Committed Revenue Contribution, then there would be limited, if any, security to backstop its payment obligations, and other transmission customers would be left paying the bill.7  DEC thus introduces a significant disconnect between the duration and magnitude of the Committed Revenue Contribution payment obligation and the actual security that underpins it, which in turn exposes other transmission customers to the cost shifting risk this proposal is ostensibly designed to mitigate.8 

Accordingly, while DEC’s Committed Revenue Contribution proposal is a step in the right direction, I do not believe DEC has demonstrated that it is just and reasonable.  DEC need not require security for 100% of the associated obligation, but some greater alignment between the payment obligations and security underpinning them is warranted.  As a result, instead of accepting this proposal, I would have rejected DEC’s filing with guidance to develop supplemental security requirements for transmission customers that are subject to DEC’s Committed Revenue Contribution construct.   

DEC Does Not Adequately Support the Size of the Committed Revenue Contribution

As discussed above, DEC’s proposed Committed Revenue Contribution framework requires an LSE serving new large loads to commit to paying at least 75% of a defined level of transmission service for 15 years, or to pay a shortfall payment if its actual NITS contribution drops below that minimum level.  In DEC’s proposed framework, this specific percentage – the requirement to pay for 75% of the projected transmission service obligation – functionally establishes the level of protection for other customers, as it sets the minimum payment obligation for LSEs serving large loads. 

While the Commission has accepted agreements reflecting similar revenue contribution obligations, those agreements were evaluated under the Mobile-Sierra framework, and thus the Commission did not scrutinize whether the specific level reflected in those agreements was, in fact, just and reasonable.9  As a result, DEC’s filing is the first time that the Commission has had the opportunity to evaluate the justness and reasonableness of such a provision, rather than simply deferring to bilaterally negotiated terms under the Mobile-Sierra framework.  

Although DEC’s proposal might be a just and reasonable level of protection for other customers, DEC has not adequately explained the basis for its proposed 75% threshold.  The Commission should expect more from utilities than proposing, without any explanation or justification, specific thresholds that are foundational to customer protection frameworks.  I hope that the Commission, through the Large Load Show Cause Order proceedings, will establish a well-defined and workable approach for evaluating customer protection proposals like that before us, which will benefit customers and utilities alike.  Until then, the Commission should thoughtfully examine the appropriate level of protection based on the record before it.  On the record here, I would reject DEC’s proposal with guidance to provide DEC the opportunity to better support that figure or propose and defend a different threshold. 

DEC’s Filing Highlights Broader Customer Protection Issues

In addition to the concerns raised above, DEC’s proposal highlights customer protection challenges around cost assignment and transparency that the Commission has raised as part of its Large Load Show Cause Orders.  While I would not reject DEC’s filing on these grounds, given relevant Commission precedent, I nonetheless take this opportunity to reiterate why additional large load reforms are necessary to adequately protect customers against unjustified cost shifts.   

Defaulting to Rolled-in Rate Treatment for Large Load Network Upgrades Might Not Adequately Protect Other Customers

In its Large Load Show Cause Orders, the Commission found that the relevant tariffs may be unjust and unreasonable because they lack adequate mechanisms to mitigate the risk of cost shifting among transmission customers, and proposed to require the RTOs/ISOs to adopt pro forma cost recovery agreements to protect other customers.10  In my concurrence to those orders, I noted that “transmission revenue contributions untethered from any assessment of the actual cost of providing transmission service induced by individual large loads may be insufficient to adequately protect other customers against unjustified cost shifts,” and encouraged the continued exploration of various customer protection approaches to help inform the Commission.11  DEC’s proposal reinforces both my concern and the need for the Commission to consider additional cost allocation options to protect other customers.

Here, DEC proposes to roll the costs of Network Upgrades, including those built to serve LSEs with new large loads, into transmission rates paid by all network customers.  The order accepts that proposal, noting that the Commission’s default practice is to roll into rates the costs of all Network Upgrades.12  However, it is unclear from the record before us whether that rolled-in rate treatment will actually protect other customers from cost shifts driven by new service requests to large loads.  In the absence of better information about the relative costs of incremental versus rolled-in rates for a specific service request, other transmission customers will have limited ability to assess the specific Network Upgrade costs associated with any individual transmission service request intended to serve large loads, and thus limited ability to confirm whether the LSE’s Committed Revenue Contribution covers at least the incremental cost of those Network Upgrades.13     

That outcome is consistent with the existing Commission policy but highlights precisely why that policy is deficient.  As I have previously written, the Commission should be open to alternative transmission pricing approaches to ensure that existing customers do not bear the costs of extraordinary transmission upgrade costs incurred to serve large loads or the risk that such loads do not materialize.14  That could take various forms, such as enforcing “higher of” pricing (i.e., requiring that service for new loads be priced at the “higher of” incremental or rolled in rates).  Overall, the Commission should do more than simply presume rolled-in rate treatment is sufficient customer protection in all instances.  If that requires a change to Commission policy, then we should make it. 

Costs Driven by Large Loads Necessitate Additional Transparency

In the Large Load Show Cause Orders, the Commission identified an emerging need for additional transparency associated with new large loads and associated upgrades.15  Although such proceedings are limited to regional transmission organizations and independent system operators, the need for additional transparency in the face of large load growth and associated transmission upgrades is applicable to all transmission owners.

In the instant filing, DEC’s proposed NITSA language leaves unchanged the level of transparency that parties, including customers, regulators, and consumer advocates, have into the cost and nature of transmission upgrades built to serve large loads.  Network Upgrades driven by large load customers will be reflected in pro forma NITSAs, which in turn will be reported to the Commission via EQRs, rather than actually filed.  While this level of transparency is consistent with current Commission requirements, it falls far short of the standard proposed by the Commission in the Large Load Show Cause Orders, as it fails to provide the information consumers and other stakeholders need for timely evaluation of the reasonableness of the rate treatment or whether costs are being correctly allocated under that selected rate treatment. 

In response to arguments made by protesters that DEC’s proposed NITSA would hinder their ability to meaningfully and timely evaluate the reasonableness of a specific rate treatment, the order points out that parties can challenge the allocation of specific costs by filing complaints related to these costs in DEC’s formula rate annual informational filings.16  However, challenges to the formula rate annual informational filings would not allow stakeholders to challenge the appropriateness of a rate treatment embedded in an executed NITSA that is reported to the Commission in an EQR. Instead, this process would only provide information for projects already in service and does not provide information on whether a transmission project was constructed to serve the needs of a specific large load.17  Similarly, EQR data does not identify such projects that are still only in the planning phase and therefore does not provide transparency into the reasonableness of a specific rate treatment before an executed NITSA is reported to the Commission in an EQR. 

Simply put, parties need access to information on new transmission projects before such projects are undertaken so that they can engage during the planning period and assess the reasonableness of the rate treatment and cost impacts of new Network Upgrades, particularly if those will be rolled into rates that all customers must pay.  The information currently available to interested parties from DEC, as described in the order, appears insufficient, even though it complies with relevant precedent.

Conclusion

Notwithstanding my concerns, I appreciate that DEC took the initiative to submit customer protection reforms to the Commission.  We should, as the Commission has done,18 encourage utilities to voluntarily submit filings that bolster customer protections while rigorously scrutinizing those filings to ensure they actually protect customers against the risk of unjustified cost shifts resulting from the addition of large loads to the system. The Commission’s actions in the Large Load Show Cause Orders reflect its intent to lead on this issue and its recognition that the status quo is insufficient.  As the Commission considers these types of proposals, we therefore can and should expect more than just a demonstration that a filing is better than the inadequate status quo.  

Unfortunately, the Commission’s findings here both set precedent and send signals about what the Commission considers an acceptable level of customer protection and evidentiary record to support it.  I do not believe that DEC has demonstrated that its filing represents an acceptable level of customer protection, and the precedent the Commission establishes here takes a step backwards from the strong arguments set forth in the Large Load Show Cause Orders.  Accordingly, rather than accept DEC’s filing, I would reject it with guidance to encourage DEC to strengthen and re-file its proposal. 

For these reasons, I respectfully dissent.

• 1Specifically, DEC proposes to require that transmission customers serving a new or transferred Network Load of 100 MW or greater to commit to pay at minimum a Committed Revenue Contribution equal to 75% of the MW value in the load schedule for each applicable month and year during the 15-year period following the in-service date of the Network Upgrades required to accommodate the load.  As the order explains, “if the Actual Revenue Contribution does not equal or exceed the Committed Revenue Contribution for that calendar year, a ‘Customer Shortfall Event’ is deemed to have occurred for that calendar year, and the customer would then have to make a Shortfall Payment to DEC’s transmission revenue requirement for each month and year the customer’s actual NITS falls short of the minimum, equivalent to the difference between the Actual Revenue Contribution and the Committed Revenue Contribution.”  Duke Energy Carolinas, LLC, 197 FERC ¶ 61,020, at P 35 (2026) (Order).
• 2These types of obligations are also a central component of the customer protection framework advanced by the Commission in its large load show cause orders.  PJM Interconnection, L.L.C., 195 FERC ¶ 61,211, errata notice, 196 FERC ¶ 61,122 (2026); Midcontinent Indep. Sys. Operator, Inc., 195 FERC ¶ 61,212 (2026); Sw. Pwr. Pool, Inc., 195 FERC ¶ 61,213 (2026); Calif. Indep. Sys. Operator Corp., 195 FERC 61,214 (2026); ISO New England, Inc., 195 FERC ¶ 61,215 (2026) (ISO-NE Show Cause Order); N.Y. Indep. Sys. Operator, Inc., 195 FERC ¶ 61,216 (2026) (collectively, Large Load Show Cause Orders).  I will cite to the ISO-NE Show Cause Order for representative citations. 
• 3I have previously noted that the Commission lacks a framework through which it can conduct that assessment.  E.g., PECO Energy Co., 193 FERC ¶ 61,148 (2025) (Comm’r Chang, concurring) (noting at P 6 “that the Commission will increasingly be asked to review one-off agreements purporting to protect customers against transmission cost shifts, without a substantive framework for assessing the adequacy of those protections”). 
• 4E.g., DEC Transmittal at 31 (“As such, the revised Attachment F-2 (pro forma NITSA) contains a comprehensive package of safeguards to protect customers from the impact of changes in service requests, including large load service requests, as well as to minimize the impact on other customer load applicants if the new network load (and its contribution to transmission revenue requirement) does not achieve commercial operation or take the minimum level of service as and where proposed.”); id. (“Together, these protections reflect a Transmission Customer’s commitment to its own project and guards against shifting costs and risks to other customers, as well as minimizes the risk that the presence of oversized or unrealistic applications unreasonably harm other applicants for network service.”).
• 5E.g., id. at 23 (“The 100 MW threshold is intended to distinguish large loads that present a higher risk of shifting costs to other customers if the load does not materialize.”)
• 6Proposed section 6.4 of the pro forma NITSA incorporates language already existing in Section 32.4 of DEC’s Joint OATT and requires Transmission Customers to provide DEC with security in situations in which new facilities or network upgrades are necessary to accommodate a change in service requests.  Section 6.6.3 specifies that DEC shall release the security provided by Transmission Customer within 90 days following the in-service date of the Network Upgrades.  DEC can require additional limited security in the event that it concludes a Transmission Customer does not meet its creditworthiness requirements.  See DEC Joint OATT, Attachment O, sections 1.2, 1.3, & 1.4. 
• 7Notably, just this week DEC entered into a settlement governing retail rates, terms, and conditions of service for large loads that includes more robust security requirements for Network Upgrade costs that span the contract term of 10-15 years.  These security obligations, which are directly tied to the cost of the Network Upgrades, extend beyond the construction phase for Network Upgrades and thus appear to meaningfully exceed those required of Transmission Customers serving large loads under DEC’s proposal.  DEC, Joint Reply Comments in Support of Large Load Tariff Settlement, In the Matter of:  Application of Duke Energy Carolinas, LLC for Adjustment of Rates and Charges, Applicable to Elec. Svc. in N.C. and Performance-Based Regulation, Docket No. E-7, Sub 1329, at 10-11 (filed Oct. 6, 2026) (discussing the security requirements included in the proposed settlement).
• 8For example, in the Large Load Show Cause Orders, the Commission proposed to require cost recovery agreements between Eligible Customers that serve large loads and transmission owners, to help protect against cost shifting from large loads to other transmission customers.  E.g.,ISO-NE Show Cause Order, 195 FERC ¶ 61,215 at PP 74-81.  DEC’s Committed Revenue Contribution construct is aimed at the same purpose and is functionally similar in many respects to the model proposed by the Commission in those orders.  However, the Commission also preliminarily found that “the cost recovery agreement should include a credit support (or other financial security requirement) sufficient to secure the obligations of the Eligible Customer taking transmission service on behalf of a large load to pay the amounts owed pursuant to the cost recovery agreement,” and noted that credit support posted as part of a retail agreement could be satisfactory.  E.g., id. P 80.  The Commission thus specifically and intentionally paired “a specified minimum financial contribution and financial security sufficient to secure such contribution” as “necessary to mitigate cost shifting if the Eligible Customer ultimately takes less transmission service than anticipated….” Id. (emphasis added).   
• 9See, e.g., Commonwealth Edison Co., 194 FERC ¶ 61,184, at P 36 (2026); id. (Comm’r Chang, concurring at P 1). 
• 10E.g.,ISO-NE Show Cause Order, 195 FERC ¶ 61,215 at PP 74-81.  The Commission also preliminarily found that those agreements “are necessary to help ensure that the Eligible Customer is responsible for timely paying the costs of large load-driven transmission (i.e., the costs required to provide them with the requested transmission service, including the cost of any needed network upgrades)….”  Id. P 77.
• 11E.g., id. (Comm’r Chang, concurring at P 8).
• 12Order at P 30.
• 13DEC’s parent company, Duke Energy, signed the White House Ratepayer Protection Pledge, which DEC discusses at length in its transmittal letter.  That pledge requires companies to pay “for new power delivery infrastructure” and pay “whether they use power or not.”  See Exec. Off. of the President, Ratepayer Protection Pledge (Mar. 4, 2026), https://www.whitehouse.gov/ratepayer-protection-pledge/.  DEC’s revised NITSA provisions arguably accomplish the latter but do not address the former, and thus it is unclear whether DEC’s proposal actually meets its parent’s commitments under that pledge.
• 14E.g., PECO Energy Co., 193 FERC ¶ 61,148 (2025) (Comm’r Chang, concurring); ISO-NE Show Cause Order, 195 FERC ¶ 61,215 (Comm’r Chang, concurring at P 8).
• 15E.g., ISO-NE Show Cause Order, 195 FERC ¶ 61,215 at PP 69-74.  The Commission specifically found that tariffs may not be just and reasonable unless they feature an online database in an easily accessible format that provides information related to transmission service requested by Eligible Customers on behalf of large loads.     
• 16Order at P 32.
• 17DEC features a historic formula rate, meaning that its rates are based on the plant in service and expenses from prior years. Thus, DEC’s transmission formula rate annual informational filings describe costs for projects that are already in service and therefore only provide a look-back at projects that have been completed. 
• 18E.g., ISO-NE Show Cause Order, 195 FERC ¶ 61,215 at P 35 (encouraging the submission of FPA section 205 filings to address issues identified in the Large Load Show Cause Orders).