By Jake Fogleman For most Coloradans, the Colorado Public Utilities Commission (PUC) is perhaps the most important state agency they’ve likely never heard of.  In the energy space, where it oversees utilities with government-granted monopolies, the three-member commission is above all charg ed with ensuring the availability of “safe, reliable, adequate, and efficient” gas and electric service at “just and reasonable” rates.  Its members are appointed rather than elected and, as a result, tend to have outlooks that reflect the policy orientation of the administration that gave them their jobs. In recent years, that means viewing energy regulation through a myopic, emissions-only lens. Now, Colorado ratepayers are quickly getting a taste of what it looks like when the commission subordinates its traditional north star to a broader desire to spearhead the state’s climate policy aspirations. Earlier this month, the PUC issued a formal decision adopting new “clean heat” targets for natural gas utilities that stand to dramatically accelerate the state’s push toward electrifying homes and businesses en route to “phasing out” natural gas use entirely.  Put plainly, the PUC has now made clear that Colorado’s gas utilities are expected to plan for the elimination of the system that they currently operate, and captive ratepayers are on the hook for bankrolling it all. This is no marginal policy tweak. In a state where more than two out of every three households rely on gas to stay warm in the winter, it marks a fundamental shift in how Coloradans are expected to live. Moving goalposts In the 2021 legislative session, the Colorado General Assembly passed SB-264, a first-in-the-nation law requiring the state’s gas distribution utilities like Xcel Energy, Black Hills, and Atmos to reduce their greenhouse gas (GHG) emissions. The law directed those utilities to set forth their proposals for slashing their emissions in “Clean Heat Plan” filings with the PUC. It set initial reduction targets of four percent by 2025 and 22 percent by 2030, using 2015 as a baseline, but stopped short of going any further.  Since then, the gas utilities have been tangling with the commission over how to feasibly meet 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, while at least one utility, Black Hills, is still locked in a dispute with the commission over its very first plan. Despite being in the early days under the current law, the PUC has now shifted the goal posts once again. This month’s decision set a brand-new interim target of a 41% emissions reduction by 2035, nearly doubling the previous mandate on a compressed timeline, and made clear that utilities should plan for the total elimination of their emissions by mid-century. While the commission stopped short of formally mandating a full phase-out of natural gas, its preference is unmistakable. “Through this Decision, and consistent with the discussion below, we set for gas utility clean heat plans a target for 2035 of 41% 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% 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% greenhouse gas reduction target for gas utility clean heat planning.” Meeting those aggressive mandates means only one thing: electrification, whether consumers like it or not. Mandated costs Critically, such a sweeping change was not the result of a referendum or citizens’ initiative, where the voters of Colorado had the final say. Nor did it originate in a new piece of legislation in the General Assembly, adopted by democratically accountable lawmakers after robust floor debate over costs, trade-offs, or feasibility. Instead, this decision came out of a quasi-judicial regulatory process that few Coloradans follow and even fewer fully understand. Yet it will soon affect nearly every household in the state just the same. Gas ratepayers will necessarily face higher utility bills to fund so-called beneficial electrification programs that involve subsidizing households into switching from gas to electric heating and appliances, to the tune of hundreds of millions, if not billions, of dollars.  Utility cost projections from the first round of Clean Heat Plan proceedings provide clues about what Colorado energy consumers can expect.  For instance, Black Hills’ “Target Achievement” portfolio submitted to the PUC to fully meet the far more modest 22% GHG reduction target pegged the costs of compliance at approximately $397 million per year. Likewise, Xcel Energy reported that its modeling found that meeting the 2030 target would cost over $1 billion over five years.  Though state lawmakers got the ball rolling in establishing Colorado’s “Clean Heat Plan” paradigm, they at least had the people of the state in mind when doing so and included a 2.5% annual cap on how much utility costs could increase to meet emissions targets. Yet in reviewing the utilities’ plans, the unelected and largely unaccountable commission has already seen fit to obliterate that cost cap. It declared, at least in Xcel’s case, that doing so was “in the public interest.” “We find that it will be necessary and permissible to approve a portfolio of clean heat resources that exceeds the maximum cost impact contemplated by SB21-264,” the commissioners wrote last summer. “Simply put, it is evident that it will be necessary to exceed the cost cap in order for the company to be on a realistic path to meeting the statutory 2030 emission reduction target.” In other words, when affordability concerns and climate policy are in tension, the PUC has already demonstrated a willingness to jettison ratepayer protections if it means an extra percentage-point reduction in emissions. With that track record already established, it’s hard not to imagine a similar strategy playing out on an even larger scale under the new, more aggressive “clean heat” targets. Who benefits? Furthermore, aside from causing ratepayers to pay more on their monthly bills to finance utility programs designed to encourage electrification, the new 2035 target will inevitably impose high personal costs on homeowners who agree to make the switch. “These costs can be in excess of $20,000 per home before incentives for a residential customer retrofitting an existing home to all-electric heating,” Xcel noted in past PUC testimony. “Depending on the scale of the electrification initiatives, total customer personal costs could be additional billions of dollars, even after rebates.” This, in turn, risks creating a vicious cycle whereby well-off homeowners better able to afford the upfront expense of retrofitting away from the gas system do so, leaving a smaller pool of less well-off gas ratepayers to cover a greater share of the fixed costs of maintaining the existing gas system, thereby creating yet another source of upward pressure on their bills. Meanwhile, those who can afford to make the switch still have to confront the fact that, as things currently stand, natural gas remains significantly cheaper than electricity for residential ratepayers on average. In 2024, residential electricity customers in Colorado paid 14.92 cents per kilowatt hour (kWh) for electric service on average. Residential natural gas customers, on the other hand, paid an average of $10.56 per Thousand Cubic Feet (Mcf) last year. Converting those prices to a common energy unit shows that electricity was more than four times as expensive, on average, per unit of energy delivered to Colorado households last year. Though modern heat pumps are incredibly efficient compared to traditional electric heating systems and older gas furnaces, those efficiency advantages aren’t enough to offset gas’s continued price advantages, particularly during the coldest days of the year.  Recent empirical studies have also borne that out. A 2024 study by researchers at the National Renewable Energy Laboratory (NREL) found that only a small minority of Colorado households currently heated by natural gas would see long-term cost savings by switching to even the cheapest, lowest-efficiency heat pumps. For gas customers considering switching to a high-efficiency cold-climate heat pump (the kind best equipped to handle Colorado’s chilly winters), the researchers found that such an investment would pencil out for approximately zero percent of state households.  Correction needed Importantly, the PUC’s decision need not be the final word on the state’s energy future. Lawmakers, perhaps under pressure from their voters, can reassert their role by clarifying statutory limits, reinforcing consumer protections, and demanding greater transparency around costs. Regulators can slow down, respect affordability constraints, and allow technology and consumer preference to dictate outcomes rather than mandates. And the public can insist that major energy decisions be made by the people they elect. Everyone agrees that Colorado’s energy future should be cleaner. But most importantly, it should also be affordable, reliable and reflective of consumer choice. As things currently stand, the state finds itself rapidly careening toward a system that delivers none of those things.  Jake Fogleman is director of policy for the Independence Institute. ...read more read less