New PUC Rules Push State Toward Natural Gas Phase-Out and Rising Utility Bills

By Jake Fogleman | The Independence Institute

The regulatory noose around Colorado’s natural gas utilities just got a whole lot tighter, and captive ratepayers stand to bear the brunt of the economic pain.

The Colorado Public Utilities Commission (PUC) on Monday issued a formal decision updating the state’s emissions targets under its first-in-the-nation “clean heat plan” law. The decision established by rule that Colorado gas utilities must reduce their greenhouse gas emissions by 41 percent compared to 2015 levels by 2035, expanding upon the existing 22 percent by 2030 target set in statute.

Furthermore, the commission opted to go beyond what the underlying statute required by flirting with a total phase-out of natural gas. Despite claiming it was not setting any further targets beyond 2035 at this time, the commission nevertheless all but established a de facto 100 percent reduction mandate by 2050.

“Through this Decision, and consistent with the discussion below, we set for gas utility clean heat plans a target for 2035 of 41 percent reduction in greenhouse gas emissions compared to a 2015 baseline,” the decision reads. “We further decline to codify future targets beyond 2035; however, because Colorado has a statewide goal of reducing greenhouse gas pollution by 100 percent by 2050, as compared to a 2005 baseline, we emphasize that clean heat plans submitted by gas utilities must account for that statutorily-established future target.”

The decision went on to add that “it is reasonable for the Commission to conclude that Colorado’s statutory goal for 2050 corresponds to a 100 percent greenhouse gas reduction target for gas utility clean heat planning.”

How We Got Here

In the 2021 legislative session, the Colorado General Assembly passed SB21-264, a first-in-the-nation law requiring the state’s gas distribution utilities to reduce their greenhouse gas emissions by four percent by 2025 and by 22 percent by 2030, from a 2015 baseline, by filing “Clean Heat Plans” with the PUC.

Since then, Colorado gas utilities like Xcel Energy, Black Hills, and Atmos have been tangling with the commission over how they suggest meeting those targets and at what cost. Some of the first approved plans have already resulted in hundreds of millions of dollars in new expenses for captive ratepayers.

Before those early plans had even been allowed to play out and their costs and emissions projections evaluated, the Colorado Energy Office in July asked the commission to establish new targets—a 41 percent GHG reduction by 2035.

In response to public comments filed by the Independence Institute, the affected utilities, the Office of the Utility Consumer Advocate, labor unions, and others that all highlighted the immense affordability and technical challenges posed by attempting to nearly double existing emissions reductions requirements on an even shorter timeline, the Polis administration eventually returned with a new request for a 31 percent reduction target instead.

It called the updated target request “ambitious but achievable” and reflective of “present concerns about costs.” It also acknowledged that “the uptake rates of customer-driven measures” like transitioning from gas furnaces and appliances to electric alternatives “has so far been low.”

However, despite this concession to reality from the administration that appointed them, the commissioners nevertheless opted to err on the side of climate policy stringency rather than affordability or feasibility, much to the delight of environmental groups like the Sierra Club and Southwest Energy Efficiency Project.

Why It Matters

So much of the state’s climate policy over the years has been obscured by regulatory jargon and euphemisms— “Clean Energy Plans,” “Clean Heat Plans,” “Beneficial Electrification,” etc. —so allow me to speak frankly about what the PUC just codified and what it means for ratepayers.

A 41 percent reduction in GHG emissions, let alone 100 percent, from the gas distribution network will necessarily require removing customers from the system. There’s simply no other way around it.

Utilities like Xcel, Black Hills, and Atmos may be able to nibble around the edges of the target by relying on recovered methane, improved pipeline leak detection and repair, and other non-demand-destroying strategies, but such approaches will not be enough to comply with state law.

This all but guarantees that gas customers around the state will soon face higher utility bills to subsidize households into switching from gas to electric heating and appliances, particularly if the first tranche of Clean Heat Plan proceedings is any guide.

READ THE FULL ARTICLE AT THE INDEPENDENCE INSTITUTE