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 4% by 2025 and by 22% by 2030, from a 2015 baseline, by filing “Clean Heat Plans” with the Public Utilities Commission (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 have even been allowed to play out and have their costs and emissions reduction projections evaluated, the Colorado Energy Office last month asked the commission to establish new targets—41% GHG reduction by 2035.
At nearly double the emissions reductions requirement as current policy, on an even shorter timeline, the new proposed plan would all but guarantee that gas customers around the state would be forced to pay far more on their utility bills to subsidize households into switching from gas to electric heating and appliances. That’s despite electricity being approximately four times more expensive per unit of energy delivered than natural gas for the average Colorado household.
Last week, Independence Institute submitted the following comments to the PUC, asking them to take heed of the risks to ratepayers and investor confidence posed by the Polis administration’s request to significantly expand the state’s Clean Heat Plan targets.
Comments submitted to the Colorado Public Utilities Commission in Proceeding No. 25R-0309G.
Dear Commissioners,
The Independence Institute (II), a 501 (c) (3) organization founded in 1985 and headquartered in Denver, Colorado, is the state’s largest champion of free markets, including in energy and environmental policy. II’s mission is to empower individual Coloradans and to educate citizens, legislators, and opinion makers about public policies that advance personal and economic freedom.
The Independence Institute believes that affordable, reliable, abundant, and safe energy can coexist with a clean and thriving environment. II’s Energy and Environmental Policy Center (E2P) is guided by the principle that prosperity and environmental stewardship are not mutually exclusive.
EXECUTIVE SUMMARY
The Colorado Energy Office and Air Pollution Control Division propose a 41 percent greenhouse gas (GHG) reduction target by 2035 for investor-owned gas utilities. The record from the first Clean Heat Plan (CHP) proceeding shows this is economically and technically unworkable — even the 22 percent by 2030 target could not be met without exceeding the statutory 2.5 percent retail rate impact cap. Black Hills Colorado Gas’ full-compliance portfolio was 67× over the cap; Xcel Energy projected over $1 billion in compliance costs plus billions in customer conversion expenses.
Independent modeling projects indicate that Governor Jared Polis’s plan for full residential heat electrification and a 100 percent renewable grid would cost up to $620.7 billion by 2050, require 12 times today’s capacity, and still result in winter blackouts.
Current law (§ 40-3.2-108, C.R.S.) authorizes targets only through 2030. Extending them to 2035 via PUC rulemaking lacks clear statutory authority and invites challenge.
Regulatory Research Associates warns that Colorado’s increasingly contentious regulatory environment raises investor risk and financing costs.
The Commission should reject or revise the proposal to ensure statutory compliance, cost-effectiveness, investor confidence, and protection against regulatory takings claims — building a clean energy transition on durable, lawful, and financially sustainable terms.
INTRODUCTION
The Colorado Public Utilities Commission (“Commission”) has opened this rulemaking to consider a petition from the Colorado Energy Office (“CEO”) and the Air Pollution Control Division (“APCD”) to set new Clean Heat Plan (“CHP”) targets, including a proposed 41 percent greenhouse gas (“GHG”) reduction by 2035 for investor-owned gas utilities. While the goals of reducing emissions and improving environmental outcomes are important, the Commission must act within statutory authority and ensure that any targets are economically sustainable, technically feasible, and legally defensible.
The record from prior CHP proceedings, independent cost modeling, and current investor risk assessments all point to the same conclusion: the proposed 2035 target—especially without a rate cap—will impose staggering costs on ratepayers, create financing headwinds for utilities, and expose the Commission to significant legal challenges.
AFFORDABILITY, ECONOMIC IMPACT, AND LEGAL RISK
The Commission’s own record from the first CHP cycle demonstrates that no utility can meet the statutory emissions targets without either violating the cost cap or imposing unsustainable costs on customers.
- Black Hills Colorado Gas (BHCG): In Proceeding No. 23A-0392EG, BHCG’s “Target Achievement” portfolio to fully meet the 22 percent GHG reduction by 2030 was estimated at approximately $397 million per year, 67× higher than the statutory cost cap. The “Within Cost Cap” portfolio only achieved ~11 percent of the target, confirming the structural infeasibility of meeting both requirements (Hearing Exhibit 104, Attachment AWC-1, Rev. 1, p. 9).
- Xcel Energy: In its CHP filing, Xcel reported that modeling conducted with Energy and Environmental Economics, Inc. (“E3”) found that meeting the 2030 target would cost over $1 billion over five years, far above the statutory ~$170 million total cap. Electrification-heavy approaches would also impose over $20,000 in personal conversion costs per home (pre-incentive), totaling billions statewide even after rebates. Xcel concluded that “meeting both the statutory emissions target and the statutory cost target is likely not possible in the same scenario” (Hearing Exhibit 101, Attachment JWI-1, p. 7).
- Independent Study: The Independence Institute estimated that complete residential heating electrification combined with the Governor’s 100 percent renewable electricity mandate by 2040 would cost Coloradans up to $620.7 billion through 2050, drive household electricity bills as high as $856/month, require 12× current generation capacity, and still cause 26 hours of mid-winter blackouts in a 2021-type weather year. By contrast, a nuclear-based strategy could achieve the same goals at less than one-third the cost without reliability issues (Independence Institute, Colorado’s Energy Future: The High Cost of 100 Percent Electric Home Heating, [IP-3-2023], pp. 1-2, 6).
- Investor Confidence: Regulatory Research Associates, part of S&P Global Commodity Insights, has warned that Colorado’s regulatory climate for gas utilities has become increasingly contentious and risk-prone, particularly in CHP proceedings. They caution that unpredictability in PUC policy “increases risk for investors” and can raise utility financing costs, undermining capital availability for the state’s energy transition (Regulatory Research Associates, Colorado Regulatory Review, July 2025, p. 2).
- Statutory Overreach Risk: Current law (§ 40-3.2-108, C.R.S.) establishes CHP targets only through 2030: 4 percent below 2015 baseline by 2025 and 22 percent below 2015 baseline by 2030 (SB 21-264, § 2). The statute provides no explicit authority for the PUC to set post-2030 targets; such targets should be tied to statewide GHG reduction goals adopted by the Air Quality Control Commission (“AQCC”) under § 25-7-102, C.R.S. Expanding CHP targets by PUC rulemaking without express legislative authority risks exceeding statutory limits.
- Potential Regulatory Takings: For gas-only utilities (e.g., Atmos Energy in Colorado), a mandate to convert customers to electric service could destroy their customer base, strand assets, and effectively eliminate their business model, raising a credible claim of a regulatory taking under the Fifth and Fourteenth Amendments, particularly where less-intrusive alternatives exist. Recent federal precedent—such as EPA’s partial disapproval of Colorado’s SIP provision mandating closure of the Ray Nixon coal plant despite Clean Air Act compliance—illustrates federal recognition that forced closure of viable, compliant generation can constitute severe interference with property rights (EPA, Colorado SIP Disapproval – Ray Nixon Station, 89 Fed. Reg. 42,118, 42,120 [May 10, 2024]).
CONCLUSION
The proposed 41 percent GHG reduction target by 2035, with no cost cap, is economically and technically unsound, will deter needed capital investment, and raises serious statutory and constitutional concerns. The Commission should either reject the proposed target outright or substantially revise it to: (1) remain within clear statutory authority, (2) ensure cost-effectiveness and technical feasibility, (3) maintain investor confidence, and (4) avoid regulatory takings claims. Colorado’s clean energy transition must be built on durable, lawful, and financially sustainable policies, not aspirational mandates disconnected from economic and operational reality.
Comments respectfully submitted,
Amy Oliver Cooke
Independence Institute
