Colorado PUC Adopts Landmark Gas Regulatory Decision

This blog was co-authored by Sierra Club, Western Resource Advocates, Southwest Energy Efficiency Project, and NRDC.  

Overhead image of downtown Denver, Colorado.

Photo by Acton Crawford on Unsplash

This week, the Colorado Public Utilities Commission (PUC) finalized its decision on Xcel’s first Gas Infrastructure Plan ("GIP"). The landmark decision is a major win for energy affordability and the climate, putting the gas company on a path towards scaling down investment in fossil infrastructure and incorporating many of the suggested improvements made by our organizations to improve the company’s gas planning processes to scale up investment in clean energy resources.  

The PUC decision directs Xcel’s future GIPs to assess a broader suite of opportunities for replacing polluting and expensive fossil gas investments with Non-Pipeline Alternatives ("NPAs"). NPAs like energy efficiency and electrification can reduce demand for fossil gas, postponing or eliminating the need for new pipeline extensions, replacements, or capacity and unlocking emissions reductions and cost savings for Coloradans.  

Colorado’s Clean Heat Goals 

In 2021, Colorado’s legislature passed Senate Bill 21-264, requiring the state’s largest utilities to reduce climate pollution from their gas systems by deploying “Clean Heat” resources, such as beneficial electrification and energy efficiency. As gas utilities cut emissions, gas use is expected to decline as households transition to clean, electric appliances – meaning that any new gas infrastructure put in the ground today may be unnecessary before it is paid off by customers. These poorly-planned investments are often called "stranded assets." 

To ensure that gas investments are aligned with Colorado’s long-term affordability and climate goals, the PUC opted to require the state’s gas utilities to file biannual GIPs, with the first plan detailing planned gas investments and comparing a select few to NPAs. As Colorado’s largest gas utility, Xcel filed its first plan last year.  

Business-as-Usual Gas Investment “No Longer Acceptable” 

Xcel's plan presumed that its gas system will continue to grow in coming decades – a proposal that is clearly at odds with Colorado's climate goals and experts' calls for a rapid reduction in pollution coming from gas burned in buildings.  

The PUC’s decision recognizes Xcel’s future GIPs must plan for an affordable, clean energy future. The ruling finds that “legacy planning processes” and business-as-usual gas investment are “no longer acceptable nor in the best interest of ratepayers" (p. 7). It directs Xcel to update its forecasted gas needs to account for factors like local building electrification policies, which will help avoid overstating the expected gas need and making unnecessary investments that are out-of-line with Colorado’s climate goals and market trends. (p. 19-20). The PUC further emphasizes that, if Xcel moves forward with gas infrastructure investments without GIP or other regulatory review, “it is likely doing so at its own risk.” (p. 33). 

We find that at this critical point in the transition decarbonizing heating, with significant outside incentives and wide availability of highly efficient electric heating options, it is imperative that we evaluate feasible options to save money for ratepayers and reduce the potential for stranded assets, rather than continuing in a business-as-usual fashion with [gas] infrastructure investments" (p. 39). 

Ultimately, the PUC’s order will make welcome changes aligning Colorado’s Gas Infrastructure Planning processes with best practices. It will require Xcel Energy in its next GIP, due in 2025, to evaluate NPAs for all large gas infrastructure projects that propose to expand the company’s gas system– up from the five NPAs that Xcel was required to present in its first GIP.

This decision will deliver significant affordability and climate benefits to Coloradans. Xcel projects total gas system expenditures of about $2.38 billion between 2023-2027, and much more beyond that five-year period. The Commission’s decision will begin to align this massive gas utility investment with Colorado's climate targets, saving customers money and reducing the risk of stranded gas assets.  

Glossary of Terms

  • Colorado Public Utilities Commission: The Public Utilities Commission is made up of three commissioners appointed by the Governor who serve four-year terms. They are responsible for “regulating electric, steam, gas, water, transportation, and telecommunications companies, plus rail & transit and gas pipeline safety.” This includes major utilities like Xcel. See a helpful fact sheet here.

  • Gas Infrastructure Plan: Gas infrastructure planning is a new process for the PUC, utilities, and stakeholders after Senate Bill 21-264 was passed in 2021. Gas Infrastructure Plans are submitted by utilities and provide information and data about the kinds of investments they want to make and the cost of those investments before spending money on projects.  

  • Non-Pipeline Alternatives: NPA is a catch-all term for any targeted investment or activity intended to reduce or remove the need for fossil gas pipeline infrastructure. NPAs can reduce GHG emissions and lower costs for consumers and utility companies. Beneficial electrification and energy efficiency are examples of NPAs.  

  • Beneficial Electrification:  Beneficial electrification is a term for “replacing direct fossil fuel use (e.g., propane, heating oil, gasoline) with electricity in a way that reduces overall emissions and energy costs." Read more here.

  • Stranded gas assets: As we transition from fossil fuels to clean energy, infrastructure meant for gas and other fossil fuels will often become obsolete and unnecessary. This fossil fuel infrastructure, termed stranded assets, is not used for its full economic lifetime and becomes a financial and environmental liability. 

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