Colorado agency demands gas utilities drastically cut emissions to meet climate goals

By EPN Staff

In a decision that will raise prices for ratepayers, the Colorado Public Utilities Commission (PUC), the agency that regulates the state’s power plants, mandated gas utilities reduce greenhouse gas emissions 41% from 2015 levels by 2035.

The rule significantly increases reductions over those set by the “Clean Heat Plan” law, SB21-264, passed just four years ago, which requires gas companies to reduce greenhouse gas (GHG) emissions by four percent in 2025 and 22% by 2030. The commission stated that it believes the new, higher goal is necessary to meet the law’s future target of a 100% reduction by 2050 (from 2005 emissions levels). 

State Senator Barbara Kirkmeyer told Energy Platform News, “The Governor and his Public Utilities Commission seem to completely ignore the 38% increase in our utility bills and have sent a clear message: Colorado will transition away from reliable, affordable, clean natural gas to unreliable and more costly wind and solar energy.”

Why it matters

The lion’s share of emission reduction will rest on changes to home and business heating systems, replacing natural gas systems with electric or heat pumps. The cost passed on to ratepayers will be in the billions. Retrofitting a house to an all-electric heat source costs more than $20,000 per residence (before incentives), Xcel documented in testimony.

The rest of the GHG reduction will be attained by fixing pipeline leaks and drawing more renewable natural gas from sources like garbage landfills and wastewater treatment plants will be in the billions. 

Additionally, the new 2035 requirement doubles the percentage of emission reductions required by 2030. 

Just to meet the lower 2030 target (22% reduction), Xcel Energy, the state’s largest gas and electric utility company, projected it would need more than $1 billion. Black Hills Energy, another large utility, estimated it would need $397 million per year to meet the lower mandate. This $1.4 billion does not include costs to customers of the other two investor-owned gas utility companies regulated by the PUC, Atmos Energy, and Colorado Natural Gas. 

The bigger picture 

The burden of these costs will be borne by those who cannot afford to switch to electric heating sources. Since low- and middle-income families cannot easily afford such costs, they subsidize the utility rebates used by wealthier households to replace gas furnaces and boilers with electric heat pumps.

As wealthier households depart from the pool of natural gas customers, a smaller number of remaining gas customers are left to support the cost of gas and the gas infrastructure. 

Even if the cost to purchase a heat pump was further reduced to make it more affordable, many households would still prefer natural gas because it costs less per month to heat the house than electricity, according to the U.S. Energy Information Administration. 

A study by the National Renewable Energy Laboratory found that converting to a low-efficiency or moderate-efficiency electric heat pump made financial sense in moderate southern climates; it did not benefit most customers in colder climates. The cost of purchasing new equipment plus higher electricity bills means that most Colorado households will not save money to make the conversion from gas heat to electricity-produced heat and in fact could pay more.