HOUSE BILL 10-1365

BY REPRESENTATIVE(S) Solano and Roberts, Benefield, Carroll T.,

Court, Fischer, Frangas, Gerou, Hullinghorst, Kagan, Kerr A., Kerr J.,

King S., Levy, Liston, Massey, May, McFadyen, McNulty, Merrifield,

Middleton, Miklosi, Peniston, Pommer, Primavera, Rice, Ryden, Scanlan,

Schafer S., Stephens, Todd, Tyler, Vaad, Vigil, Ferrandino, Kefalas,

Labuda, McCann, Nikkel, Riesberg, Summers;

also SENATOR(S) Whitehead and Penry, Bacon, Boyd, Brophy,

Carroll M., Foster, Heath, Johnston, Morse, Romer, Shaffer B., Steadman,

Williams.

CONCERNING INCENTIVES FOR ELECTRIC UTILITIES TO REDUCE AIR

EMISSIONS, AND, IN CONNECTION THEREWITH, REQUIRING PLANS TO

ACHIEVE SUCH REDUCTIONS THAT GIVE PRIMARY CONSIDERATION TO

REPLACING OR REPOWERING COAL GENERATION WITH NATURAL GAS

AND ALSO CONSIDERING OTHER LOW-EMITTING RESOURCES, AND

MAKING AN APPROPRIATION.

Be it enacted by the General Assembly of the State of Colorado:

SECTION 1. Article 3.2 of title 40, Colorado Revised Statutes, is

amended BY THE ADDITION OF A NEW PART to read:

PART 2

NOTE: This bill has been prepared for the signature of the appropriate legislative

officers and the Governor. To determine whether the Governor has signed the bill

or taken other action on it, please consult the legislative status sheet, the legislative

history, or the Session Laws.

________

Capital letters indicate new material added to existing statutes; dashes through words indicate

deletions from existing statutes and such material not part of act.
COORDINATED UTILITY PLAN

TO REDUCE AIR EMISSIONS

40-3.2-201. Short title. THIS PART 2 SHALL BE KNOWN AND MAY BE

CITED AS THE "CLEAN AIR - CLEAN JOBS ACT".

40-3.2-202. Legislative declaration. (1) THE GENERAL ASSEMBLY

HEREBY FINDS, DETERMINES, AND DECLARES THAT THE FEDERAL "CLEAN

AIR ACT", 42 U.S.C. SEC. 7401 ET SEQ., WILL LIKELY REQUIRE REDUCTIONS

IN EMISSIONS FROM COAL-FIRED POWER PLANTS OPERATED BY

RATE-REGULATED UTILITIES IN COLORADO. A COORDINATED PLAN OF

EMISSION REDUCTIONS FROM THESE COAL-FIRED POWER PLANTS WILL

ENABLE COLORADO RATE-REGULATED UTILITIES TO MEET THE

REQUIREMENTS OF THE FEDERAL ACT AND PROTECT PUBLIC HEALTH AND THE

ENVIRONMENT AT A LOWER COST THAN A PIECEMEAL APPROACH. A

COORDINATED PLAN OF REDUCTION OF EMISSIONS FOR COLORADO'S

RATE-REGULATED UTILITIES WILL ALSO RESULT IN REDUCTIONS IN MANY AIR

POLLUTANTS AND PROMOTE THE USE OF NATURAL GAS AND OTHER

LOW-EMITTING RESOURCES TO MEET COLORADO'S ELECTRICITY NEEDS,

WHICH WILL IN TURN PROMOTE DEVELOPMENT OF COLORADO'S ECONOMY

AND INDUSTRY.

(2) THE GENERAL ASSEMBLY FURTHER FINDS THAT THE USE OF

NATURAL GAS TO REDUCE COAL-FIRED EMISSIONS MAY REQUIRE

RATE-REGULATED UTILITIES TO ENTER INTO LONG-TERM CONTRACTS FOR

NATURAL GAS IN A MANNER THAT PROTECTS ELECTRICITY CONSUMERS.

EVEN THOUGH SUCH LONG-TERM CONTRACTS MIGHT BE BENEFICIAL TO

CONSUMERS, FINANCIAL RATING AGENCIES COULD FIND THAT SUCH

LONG-TERM CONTRACTS INCREASE THE FINANCIAL RISK TO

RATE-REGULATED UTILITIES, WHICH IN TURN COULD INCREASE THE COST OF

CAPITAL TO THESE UTILITIES. THE GENERAL ASSEMBLY FINDS THAT IT IS

IMPORTANT TO GIVE FINANCIAL MARKETS CONFIDENCE THAT UTILITIES WILL

BE ABLE TO RECOVER THE COSTS OF LONG-TERM GAS CONTRACTS WITHOUT

THE RISK OF FUTURE REGULATORS DISALLOWING CONTRACTS.

(3) THE GENERAL ASSEMBLY FURTHER FINDS AND DECLARES THAT

COLORADO RATE-REGULATED UTILITIES REQUIRE TIMELY AND

FORWARD-LOOKING REVIEWS OF THEIR COSTS OF PROVIDING UTILITY

SERVICE IN ORDER TO UNDERTAKE THE COMPREHENSIVE AND EXTENSIVE

PLANNING AND CHANGES TO THEIR BUSINESS OPERATIONS CONTEMPLATED

PAGE 2-HOUSE BILL 10-1365
BY THIS PART 2. IN ORDER TO ALLOW THESE UTILITIES TO CONTINUE TO

PROVIDE RELIABLE ELECTRIC SERVICE, ALTER THEIR OPERATIONS IN THE

MANNER DESCRIBED BY THIS PART 2, AND MEET OTHER STATE PUBLIC POLICY

GOALS, IT IS IMPERATIVE THAT COLORADO RATE-REGULATED UTILITIES

CONTINUE IN SOUND FINANCIAL CONDITION AND REMAIN ATTRACTIVE

INVESTMENTS SO THAT SUFFICIENT CAPITAL IS PROVIDED TO ACHIEVE THE

STATE'S GOALS. TO THAT END, THE GENERAL ASSEMBLY FINDS THAT THE

COMMISSION SHOULD HAVE ADDITIONAL TOOLS AND MORE FLEXIBILITY IN

ITS REGULATORY AUTHORITY TO ENSURE THE CONTINUED FINANCIAL

HEALTH OF THESE UTILITIES. THE GENERAL ASSEMBLY ALSO FINDS AND

DECLARES THAT THE ACTIONS PROVIDED FOR IN THIS PART 2 BE

IMPLEMENTED IN A MANNER TO ADDRESS THE SOUND ECONOMIC, HEALTH,

AND ENVIRONMENTAL CONDITIONS OF ENERGY PRODUCING COMMUNITIES.

40-3.2-203. Definitions. AS USED IN THIS PART 2, UNLESS THE

CONTEXT OTHERWISE REQUIRES:

(1) "AIR QUALITY CONTROL COMMISSION" MEANS THE COMMISSION

CREATED IN SECTION 25-7-104, C.R.S.

(2) "DEPARTMENT" MEANS THE DEPARTMENT OF PUBLIC HEALTH

AND ENVIRONMENT.

(3) "FEDERAL ACT" MEANS THE FEDERAL "CLEAN AIR ACT", 42

U.S.C. SEC. 7401 ET SEQ., AS AMENDED.

(4) "STATE ACT" MEANS THE "COLORADO AIR POLLUTION

PREVENTION AND CONTROL ACT", ARTICLE 7 OF TITLE 25, C.R.S.

(5) "STATE IMPLEMENTATION PLAN" MEANS THE PLAN REQUIRED BY

AND DESCRIBED IN SECTION 110 (a) AND OTHER PROVISIONS OF THE FEDERAL

ACT.

40-3.2-204. Emission control plans - role of the department of

public health and environment - timing of emission reductions -

approval. (1) ON OR BEFORE AUGUST 15, 2010, AND IN COORDINATION

WITH CURRENT OR EXPECTED REQUIREMENTS OF THE FEDERAL ACT AND THE

STATE ACT, ALL RATE-REGULATED UTILITIES THAT OWN OR OPERATE

COAL-FIRED ELECTRIC GENERATING UNITS LOCATED IN COLORADO SHALL

SUBMIT TO THE COMMISSION AN EMISSION REDUCTION PLAN FOR EMISSIONS

PAGE 3-HOUSE BILL 10-1365
FROM THOSE UNITS.

(2) (a) THE PLAN FILED UNDER THIS SECTION SHALL COVER A

MINIMUM OF NINE HUNDRED MEGAWATTS OR FIFTY PERCENT OF THE

UTILITY'S COAL-FIRED ELECTRIC GENERATING UNITS IN COLORADO,

WHICHEVER IS SMALLER. EXCEPT AS SET FORTH IN SECTION 40-3.2-206, THE

COAL-FIRED CAPACITY COVERED UNDER THE PLAN FILED UNDER THIS

SECTION SHALL NOT INCLUDE ANY COAL-FIRED CAPACITY THAT THE UTILITY

HAS ALREADY ANNOUNCED THAT IT PLANS TO RETIRE PRIOR TO JANUARY 1,

2015. AT THE UTILITY'S DISCRETION, THE PLAN MAY INCLUDE SOME OR ALL

OF THE FOLLOWING ELEMENTS:

(I) NEW EMISSION CONTROL EQUIPMENT FOR OXIDES OF NITROGEN

AND OTHER POLLUTANTS;

(II) RETIREMENT OF COAL-FIRED UNITS, IF THE RETIRED COAL-FIRED

UNITS ARE REPLACED BY NATURAL GAS-FIRED ELECTRIC GENERATION OR

OTHER LOW-EMITTING RESOURCES AS DEFINED IN SECTION 40-3.2-206,

INCLUDING ENERGY EFFICIENCY;

(III) CONVERSION OF COAL-FIRED GENERATION TO RUN ON NATURAL

GAS;

(IV) LONG-TERM FUEL SUPPLY AGREEMENTS;

(V) NEW NATURAL GAS PIPELINES AND OTHER SUPPORTING GAS

INFRASTRUCTURE;

(VI) INCREASED UTILIZATION OF EXISTING GAS-FIRED GENERATING

CAPACITY;

(VII) NEW TRANSMISSION LINES AND OTHER SUPPORTING

TRANSMISSION INFRASTRUCTURE;

(VIII) EMISSION CONTROL EQUIPMENT THAT IS REQUIRED TO BE

INSTALLED AT AFFECTED UNITS PRIOR TO OR IN CONJUNCTION WITH ANY

RETIREMENT, CONVERSION, OR EMISSION CONTROL EQUIPMENT RETROFIT SET

FORTH UNDER THE PLAN IN ORDER TO LIMIT ANY POLLUTANT OTHER THAN

OXIDES OF NITROGEN; AND

PAGE 4-HOUSE BILL 10-1365
(IX) ANY OTHER CAPITAL, FUEL, AND OPERATIONS AND

MAINTENANCE EXPENDITURES APPROPRIATE TO SUPPORT THE

IMPLEMENTATION OF THE PLAN.

(b) (I) PRIOR TO FILING THE PLAN, THE UTILITY SHALL CONSULT WITH

THE DEPARTMENT AND SHALL WORK WITH THE DEPARTMENT IN GOOD FAITH

TO DESIGN A PLAN TO MEET THE CURRENT AND REASONABLY FORESEEABLE

REQUIREMENTS OF THE FEDERAL ACT AND STATE LAW IN A COST-EFFECTIVE

AND FLEXIBLE MANNER.

(II) THE COMMISSION SHALL PROVIDE THE DEPARTMENT AN

OPPORTUNITY TO:

(A) COMMENT ON THE AIR QUALITY, ALL OTHER AIR POLLUTANTS,

AND OTHER EMISSION REDUCTIONS OF THE PLAN; AND

(B) EVALUATE AND DETERMINE WHETHER THE PLAN IS CONSISTENT

WITH THE CURRENT AND REASONABLY FORESEEABLE REQUIREMENTS OF THE

FEDERAL ACT.

(III) IN COMMENTING UPON THE UTILITY'S PLAN, THE DEPARTMENT

SHALL DETERMINE WHETHER ANY NEW OR REPOWERED ELECTRIC

GENERATING UNIT PROPOSED UNDER THE PLAN, OTHER THAN A PEAKING

FACILITY UTILIZED LESS THAN TWENTY PERCENT ON AN ANNUAL BASIS OR A

FACILITY THAT CAPTURES AND SEQUESTERS MORE THAN SEVENTY PERCENT

OF EMISSIONS NOT SUBJECT TO A NATIONAL AMBIENT AIR QUALITY

STANDARD OR A HAZARDOUS AIR POLLUTANT STANDARD, WILL ACHIEVE

EMISSION RATES EQUIVALENT TO OR LESS THAN A COMBINED-CYCLE

NATURAL GAS GENERATING UNIT.

(IV) THE COMMISSION SHALL NOT APPROVE A PLAN EXCEPT AFTER

AN EVIDENTIARY HEARING AND UNLESS THE DEPARTMENT HAS DETERMINED

THAT THE PLAN IS CONSISTENT WITH THE CURRENT AND REASONABLY

FORESEEABLE REQUIREMENTS OF THE FEDERAL ACT.

(c) THE PLAN SHALL INCLUDE A SCHEDULE THAT WOULD RESULT IN

FULL IMPLEMENTATION OF THE PLAN ON OR BEFORE DECEMBER 31, 2017.

THE SCHEDULE MAY INCLUDE INTERIM MILESTONES. THE UTILITY SHALL

DESIGN THE SCHEDULE TO PROTECT SYSTEM RELIABILITY, CONTROL OVERALL

COST, AND ASSURE CONSISTENCY WITH THE REQUIREMENTS OF THE FEDERAL

PAGE 5-HOUSE BILL 10-1365
ACT.

(d) THE PLAN SHALL SET FORTH THE COSTS ASSOCIATED WITH

ACTIVITIES IDENTIFIED IN THE PLAN, INCLUDING THE PLANNING,

DEVELOPMENT, CONSTRUCTION, AND OPERATION OF ELEMENTS IDENTIFIED

PURSUANT TO SUBPARAGRAPHS (I) TO (IX) OF PARAGRAPH (a) OF

SUBSECTION (2) OF THIS SECTION, AS WELL AS THE COSTS OF ANY

SHUTDOWN, DECOMMISSIONING, OR REPOWERING OF EXISTING COAL-FIRED

ELECTRIC GENERATING UNITS THAT ARE SET FORTH IN THE PLAN.

40-3.2-205. Review - approval. (1) IN EVALUATING THE PLAN, THE

COMMISSION SHALL CONSIDER THE FOLLOWING FACTORS:

(a) WHETHER THE DEPARTMENT REPORTS THAT THE PLAN IS LIKELY

TO ACHIEVE AT LEAST A SEVENTY TO EIGHTY PERCENT REDUCTION, OR

GREATER, IN ANNUAL EMISSIONS OF OXIDES OF NITROGEN AS NECESSARY TO

COMPLY WITH CURRENT AND REASONABLY FORESEEABLE REQUIREMENTS OF

THE FEDERAL ACT AND THE STATE ACT. THE REDUCTION IN EMISSIONS

UNDER THIS PARAGRAPH (a) SHALL BE MEASURED FROM 2008 LEVELS AT

COAL-FIRED POWER PLANTS IDENTIFIED IN THE PLAN. IN DETERMINING THE

REDUCTION IN EMISSIONS UNDER THIS PARAGRAPH (a), THE DEPARTMENT

SHALL INCLUDE:

(I) EMISSIONS FROM COAL-FIRED POWER PLANTS IDENTIFIED IN THE

PLAN AND CONTINUING TO OPERATE AFTER RETROFIT WITH EMISSION

CONTROL EQUIPMENT; AND

(II) EMISSIONS FROM ANY FACILITIES CONSTRUCTED TO REPLACE

ANY RETIRED COAL-FIRED POWER PLANTS IDENTIFIED IN THE PLAN.

(b) WHETHER THE DEPARTMENT HAS MADE THE DETERMINATION

UNDER SECTION 40-3.2-204 (2) (b) (III);

(c) THE DEGREE TO WHICH THE PLAN WILL RESULT IN REDUCTIONS IN

OTHER AIR POLLUTANT EMISSIONS;

(d) THE DEGREE TO WHICH THE PLAN WILL INCREASE UTILIZATION OF

EXISTING NATURAL GAS-FIRED GENERATING CAPACITY;

(e) THE DEGREE TO WHICH THE PLAN ENHANCES THE ABILITY OF THE

PAGE 6-HOUSE BILL 10-1365
UTILITY TO MEET STATE OR FEDERAL CLEAN ENERGY REQUIREMENTS, RELIES

ON ENERGY EFFICIENCY, OR RELIES ON OTHER LOW-EMITTING RESOURCES;

(f) WHETHER THE PLAN PROMOTES COLORADO ECONOMIC

DEVELOPMENT;

(g) WHETHER THE PLAN PRESERVES RELIABLE ELECTRIC SERVICE FOR

COLORADO CONSUMERS;

(h) WHETHER THE PLAN IS LIKELY TO HELP PROTECT COLORADO

CUSTOMERS FROM FUTURE COST INCREASES, INCLUDING COSTS ASSOCIATED

WITH REASONABLY FORESEEABLE EMISSION REDUCTION REQUIREMENTS;

AND

(i) WHETHER THE COST OF THE PLAN RESULTS IN REASONABLE RATE

IMPACTS. IN EVALUATING THE RATE IMPACTS OF THE PLAN, THE COMMISSION

SHALL EXAMINE THE IMPACT OF THE RATES ON LOW-INCOME CUSTOMERS.

(2) THE COMMISSION SHALL REVIEW THE PLAN AND ENTER AN ORDER

APPROVING, DENYING, OR MODIFYING THE PLAN BY DECEMBER 15, 2010.

ANY MODIFICATIONS REQUIRED BY THE COMMISSION SHALL RESULT IN A

PLAN THAT THE DEPARTMENT DETERMINES IS LIKELY TO MEET CURRENT AND

REASONABLY FORESEEABLE FEDERAL AND STATE CLEAN AIR ACT

REQUIREMENTS.

(3) ALL ACTIONS TAKEN BY THE UTILITY IN FURTHERANCE OF, AND

IN COMPLIANCE WITH, AN APPROVED PLAN ARE PRESUMED TO BE PRUDENT

ACTIONS, THE COSTS OF WHICH ARE RECOVERABLE IN RATES AS PROVIDED IN

SECTION 40-3.2-207.

(4) IF THE UTILITY DISAGREES WITH THE COMMISSION'S

MODIFICATIONS TO ITS PROPOSED PLAN WITH RESPECT TO RESOURCE

SELECTION, THE UTILITY MAY WITHDRAW ITS APPLICATION.

40-3.2-206. Coal plant retirements - replacement resources.

(1) (a) THE GENERAL ASSEMBLY FINDS THAT, IN DESIGNING A COORDINATED

EMISSION REDUCTION PLAN AS DESCRIBED IN SECTION 40-3.2-204 AND TO

EXPEDITIOUSLY ACCELERATE COAL PLANT RETIREMENTS, IT IS IN THE PUBLIC

INTEREST FOR UTILITIES TO GIVE PRIMARY CONSIDERATION TO REPLACING OR

REPOWERING THEIR COAL GENERATION WITH NATURAL GAS GENERATION

PAGE 7-HOUSE BILL 10-1365
AND THAT UTILITIES SHALL ALSO CONSIDER OTHER LOW-EMITTING

RESOURCES, INCLUDING ENERGY EFFICIENCY, IF THIS REPLACEMENT OR

REPOWERING CAN BE ACCOMPLISHED PRUDENTLY AND FOR REASONABLE

RATE IMPACTS COMPARED WITH PLACING ADDITIONAL EMISSION CONTROLS

ON COAL-FIRED GENERATING UNITS, AND IF ELECTRIC SYSTEM RELIABILITY

CAN BE PRESERVED. TO THAT END, IN THE PLAN REQUIRED UNDER SECTION

40-3.2-204, EACH UTILITY SHALL INCLUDE AN EVALUATION OF THE

FOLLOWING PROPOSALS:

(I) THE COST AND SYSTEM RELIABILITY IMPACTS OF RETIRING A

MINIMUM OF NINE HUNDRED MEGAWATTS OF COAL-FIRED ELECTRIC

GENERATING CAPACITY, OR FIFTY PERCENT OF THE UTILITY'S COAL-FIRED

GENERATING UNITS IN COLORADO, WHICHEVER IS LESS, BY JANUARY 1,2015,

AND REPOWERING THE AFFECTED COAL-FIRED FACILITIES WITH NATURAL GAS

OR REPLACING THEM WITH NATURAL GAS-FIRED GENERATION OR OTHER

LOW-EMITTING RESOURCES, INCLUDING ENERGY EFFICIENCY. THE

COAL-FIRED CAPACITY EVALUATED UNDER THIS SUBPARAGRAPH (I) SHALL

NOT INCLUDE ANY COAL-FIRED CAPACITY THAT THE UTILITY HAS ALREADY

ANNOUNCED THAT IT PLANS TO RETIRE PRIOR TO JANUARY 1, 2015. THE

UTILITY MAY ALSO PREPARE EVALUATIONS OF ADDITIONAL SCENARIOS,

INCLUDING SCENARIOS THAT RESULT IN THE RETIREMENT OF LESS THAN NINE

HUNDRED MEGAWATTS OF COAL-FIRED ELECTRIC GENERATING CAPACITY OR

THE RETIREMENT OF SOME PORTION OF THE NINE HUNDRED MEGAWATTS OF

CAPACITY AFTER JANUARY 1, 2015, BUT BEFORE JANUARY 1, 2018.

(II) RETIREMENTS OF A PORTION OF ITS COAL-FIRED GENERATING

CAPACITY IN THE PERIOD AFTER THE EFFECTIVE DATE OF THIS PART 2 BUT

PRIOR TO JANUARY 1, 2015. AT A MINIMUM, THE UTILITY SHALL EVALUATE

WHETHER TO RETIRE A PORTION OF ITS COAL-FIRED CAPACITY ON OR BEFORE

JANUARY 1, 2013, OR WHETHER THE RETIREMENTS OF COAL-FIRED

GENERATING FACILITIES THAT HAVE ALREADY BEEN ANNOUNCED COULD BE

ADVANCED TO AN EARLIER RETIREMENT DATE.

(b) (I) FOR ALL EVALUATIONS REQUIRED BY THIS SUBSECTION (1),

THE UTILITY SHALL REPORT:

(A) THE ESTIMATED OVERALL IMPACTS ON THE UTILITY'S EMISSIONS

OF OXIDES OF NITROGEN AND OTHER POLLUTANTS;

(B) THE FEASIBILITY OF THE RETIREMENT, REPOWERING, OR

PAGE 8-HOUSE BILL 10-1365
REPLACEMENT ON THE SCHEDULE PROPOSED IN THE EVALUATION;

(C) THE COSTS AND IMPACT ON ELECTRIC RATES FROM THESE

PROPOSALS; AND

(D) THE IMPACT OF THE RETIREMENTS ON THE RELIABILITY OF THE

UTILITY'S ELECTRIC SERVICE.

(II) ALL EVALUATIONS REQUIRED BY THIS SUBSECTION (1) SHALL

CONTRAST THE COSTS OF REPLACING COAL GENERATION WITH NATURAL GAS

GENERATION AND OTHER LOW-EMITTING RESOURCES, INCLUDING ENERGY

EFFICIENCY, WITH THE COSTS OF INSTALLING ADDITIONAL EMISSION

CONTROLS ON THE COAL PLANTS.

(2) THE UTILITY SHALL SET FORTH IN ITS PLAN THE UTILITY'S

PROPOSAL FOR THE BEST WAY OF TIMELY MEETING THE EMISSION REDUCTION

REQUIREMENTS REQUIRED BY FEDERAL AND STATE LAW, GIVEN THE NEED TO

PRESERVE ELECTRIC SYSTEM RELIABILITY, TO AVOID UNREASONABLE RATE

INCREASES, AND THE ECONOMIC AND ENVIRONMENTAL BENEFITS OF

COORDINATED EMISSION REDUCTIONS.

(3) IN REVIEWING THE REASONABLENESS OF THE UTILITY'S PROPOSED

PLAN, THE COMMISSION SHALL:

(a) COMPARE THE RELATIVE COSTS OF REPOWERING OR REPLACING

COAL FACILITIES WITH NATURAL GAS GENERATION OR OTHER LOW-EMITTING

RESOURCES, INCLUDING ENERGY EFFICIENCY, TO AN ALTERNATIVE THAT

INCORPORATES EMISSION CONTROLS ON THE EXISTING COAL-FIRED UNITS;

(b) USE REASONABLE PROJECTIONS OF FUTURE COAL AND NATURAL

GAS COSTS;

(c) INCORPORATE A REASONABLE ESTIMATE FOR THE COST OF

REASONABLY FORESEEABLE EMISSION REGULATION CONSISTENT WITH THE

COMMISSION'S EXISTING PRACTICE;

(d) CONSIDER THE DEGREE TO WHICH THE PLAN WILL INCREASE

UTILIZATION OF EXISTING NATURAL GAS-FIRED GENERATING RESOURCES

AVAILABLE TO THE UTILITY, TOGETHER WITH INCREASED UTILIZATION OF

OTHER LOW-EMITTING RESOURCES INCLUDING ENERGY EFFICIENCY; AND

PAGE 9-HOUSE BILL 10-1365
(e) CONSIDER THE ECONOMIC AND ENVIRONMENTAL BENEFITS OF A

COORDINATED EMISSIONS REDUCTION STRATEGY.

(4) THE UTILITY MAY ENTER INTO LONG-TERM GAS SUPPLY

AGREEMENTS TO IMPLEMENT THE REQUIREMENTS OF THIS PART 2. A

LONG-TERM GAS SUPPLY AGREEMENT IS AN AGREEMENT WITH A TERM OF

NOT LESS THAN THREE YEARS OR MORE THAN TWENTY YEARS. ALL

LONG-TERM GAS SUPPLY AGREEMENTS MAY BE FILED WITH THE COMMISSION

FOR REVIEW AND APPROVAL. THE COMMISSION SHALL DETERMINE WHETHER

THE UTILITY ACTED PRUDENTLY BY ENTERING INTO THE SPECIFIC

AGREEMENT, WHETHER THE PROPOSED AGREEMENT APPEARS TO BE

BENEFICIAL TO CONSUMERS, AND WHETHER THE AGREEMENT IS IN THE

PUBLIC INTEREST. IF AN AGREEMENT IS APPROVED, THE UTILITY IS ENTITLED

TO RECOVER THROUGH RATES THE COSTS IT INCURS UNDER THE APPROVED

AGREEMENT, AND ANY APPROVED AMENDMENTS TO THE AGREEMENT,

NOTWITHSTANDING ANY CHANGE IN THE MARKET PRICE OF NATURAL GAS

DURING THE TERM OF THE AGREEMENT. THE COMMISSION SHALL NOT

REVERSE ITS APPROVAL OF THE LONG-TERM GAS AGREEMENT EVEN IF THE

AGREEMENT PRICE IS HIGHER THAN A FUTURE MARKET PRICE OF NATURAL

GAS.

40-3.2-207. Cost recovery - legislative declaration. (1) (a) A

UTILITY IS ENTITLED TO FULLY RECOVER THE COSTS THAT IT PRUDENTLY

INCURS IN EXECUTING AN APPROVED EMISSION REDUCTION PLAN, INCLUDING

THE COSTS OF PLANNING, DEVELOPING, CONSTRUCTING, OPERATING, AND

MAINTAINING ANY EMISSION CONTROL OR REPLACEMENT CAPACITY

CONSTRUCTED PURSUANT TO THE PLAN, AS WELL AS ANY INTERIM AIR

QUALITY EMISSION CONTROL COSTS THE UTILITY INCURS WHILE THE PLAN IS

BEING IMPLEMENTED.

(b) THE GENERAL ASSEMBLY FINDS THAT THE EMISSIONS

REDUCTIONS UNDER THIS PART 2 ARE BEING MADE TO ASSIST THE STATE OF

COLORADO TO COMPLY WITH CURRENT AND REASONABLY FORESEEABLE

EMISSION RESTRICTIONS UNDER FEDERAL LAW. TO PROVIDE THIS

ASSISTANCE, THE UTILITY IS BEING ASKED TO MAKE SUBSTANTIAL CAPITAL

INVESTMENTS AND TO ENTER INTO SUBSTANTIAL CONTRACTUAL

COMMITMENTS IN AN EXPEDITED TIME PERIOD OUTSIDE OF THE NORMAL

RESOURCE PLANNING PROCESS.

(2) (a) IF A PUBLIC UTILITY'S WHOLESALE SALES ARE SUBJECT TO

PAGE 10-HOUSE BILL 10-1365
REGULATION BY THE FEDERAL ENERGY REGULATORY COMMISSION, AND IF

THE PUBLIC UTILITY SELLS POWER ON THE WHOLESALE MARKET FROM A

PROJECT DEVELOPED PURSUANT TO THE PLAN, THE COMMISSION SHALL

DETERMINE WHETHER TO ASSIGN A PORTION OF THE PLAN COST TO BE

RECOVERED FROM THE PUBLIC UTILITY'S WHOLESALE CUSTOMERS. THE

COMMISSION MAY MAKE SUCH ASSIGNMENT TO THE EXTENT THAT IT DOES

NOT CONFLICT WITH THE PUBLIC UTILITY'S WHOLESALE CONTRACTS ENTERED

INTO BEFORE THE EFFECTIVE DATE OF THIS PART 2.

(b) EXCEPT AS SPECIFIED IN PARAGRAPH (c) OF THIS SUBSECTION (2),

IF THE COMMISSION MAKES AN ASSIGNMENT OF COSTS PURSUANT TO

PARAGRAPH (a) OF THIS SUBSECTION (2) AND IF THE UTILITY APPLIES TO THE

FEDERAL ENERGY REGULATORY COMMISSION FOR RECOVERY AND PURSUES

THAT APPLICATION IN GOOD FAITH, THEN:

(I) TO THE EXTENT THAT THE FEDERAL ENERGY REGULATORY

COMMISSION DOES NOT PERMIT RECOVERY OF THE ALLOCATED WHOLESALE

PORTION OF PLAN-RELATED INVESTMENT, THE COMMISSION SHALL APPROVE

RETAIL RATES SUFFICIENT TO RECOVER SUCH DISALLOWED WHOLESALE

PORTION OF THE INVESTMENT THROUGH THE RECOVERY MECHANISM

DETAILED IN THIS SECTION; AND

(II) THE PUBLIC UTILITY MAY NOT RECOVER ANY REVENUE

SHORTFALL CAUSED BY A DELAY IN MAKING ANY FILING WITH THE FEDERAL

ENERGY REGULATORY COMMISSION OR DUE TO ANY RATE SUSPENSION

PERIOD EMPLOYED BY THE FEDERAL ENERGY REGULATORY COMMISSION OR

BECAUSE THE PUBLIC UTILITY FAILED TO PURSUE RECOVERY OF THE

AMOUNTS AT THE FEDERAL ENERGY REGULATORY COMMISSION IN GOOD

FAITH.

(c) IF THE PUBLIC UTILITY FAILS TO APPLY TO THE FEDERAL ENERGY

REGULATORY COMMISSION WITHIN SIX MONTHS AFTER THE COMMISSION'S

FINAL ORDER ASSIGNING A PORTION OF THE PLAN'S COSTS TO THE PUBLIC

UTILITY'S WHOLESALE CUSTOMERS, THE PUBLIC UTILITY IS NOT ENTITLED TO

RECOVER THE ASSIGNED PORTION OF THE COSTS FROM ITS RETAIL

CUSTOMERS.

(3) CURRENT RECOVERY SHALL BE ALLOWED ON CONSTRUCTION

WORK IN PROGRESS AT THE UTILITY'S WEIGHTED AVERAGE COST OF CAPITAL,

INCLUDING ITS MOST RECENTLY AUTHORIZED RATE OF RETURN ON EQUITY,

PAGE 11-HOUSE BILL 10-1365
FOR EXPENDITURES ON PROJECTS ASSOCIATED WITH THE PLAN DURING THE

CONSTRUCTION, STARTUP, AND PRE-SERVICE IMPLEMENTATION PHASES OF

THE PROJECTS.

(4) TO THE EXTENT THAT AN APPROVED PLAN INCLUDES THE EARLY

CONVERSION OR CLOSURE OF COAL-BASED GENERATION CAPACITY BY

JANUARY 1, 2015, AND TO THE EXTENT THAT THE UTILITY DEMONSTRATES

THAT A LAG IN THE RECOVERY OF THE COSTS OF THE PLAN RELATED TO THE

INVESTMENT REQUIRED BY SUCH PLAN CONTRIBUTES TO A UTILITY EARNING

LESS THAN ITS AUTHORIZED RETURN ON EQUITY, THE COMMISSION SHALL

EMPLOY RATE-MAKING MECHANISMS, IN ADDITION TO ALLOWING A CURRENT

RETURN ON CONSTRUCTION WORK IN PROGRESS, THAT PERMIT RATE

ADJUSTMENTS, NO LESS FREQUENTLY THAN ONCE PER YEAR, WITHOUT

REQUIRING THE UTILITY TO FILE A GENERAL RATE CASE TO ALLOW RECOVERY

OF THE APPROVED PLAN'S COSTS. SUCH RATE-MAKING MECHANISMS MAY

INCLUDE A SEPARATE RATE ADJUSTMENT CLAUSE, REGULAR MAKE-WHOLE

RATE INCREASES, OR OTHER APPROPRIATE MECHANISMS AS DETERMINED BY

THE COMMISSION.

(5) DURING THE TIME ANY SPECIAL REGULATORY PRACTICE IS IN

EFFECT, THE UTILITY SHALL FILE A NEW RATE CASE AT LEAST EVERY TWO

YEARS OR FILE A BASE RATE RECOVERY PLAN THAT SPANS MORE THAN ONE

YEAR.

(6) THE COMMISSION SHALL ALLOW, BUT NOT REQUIRE, THE UTILITY

TO DEVELOP AND OWN AS UTILITY RATE-BASED PROPERTY ANY NEW

ELECTRIC GENERATING PLANT CONSTRUCTED PRIMARILY TO REPLACE ANY

COAL-FIRED ELECTRIC GENERATING UNIT RETIRED PURSUANT TO THE PLAN

FILED UNDER THIS PART 2.

40-3.2-208. Air quality planning. (1) THE AIR QUALITY

PROVISIONS OF THE EMISSION REDUCTION PLAN FILED UNDER THIS PART 2

ARE INTENDED TO FULFILL THE REQUIREMENTS OF THE STATE AND FEDERAL

ACTS AND SHALL BE PROPOSED BY THE DEPARTMENT TO THE AIR QUALITY

CONTROL COMMISSION AFTER THE UTILITY FILES THE PLAN WITH THE

COMMISSION TO BE CONSIDERED FOR INCORPORATION INTO THE REGIONAL

HAZE ELEMENT OF THE STATE IMPLEMENTATION PLAN.

(2) (a) UPON THE UTILITY'S FILING OF THE UTILITY PLAN WITH THE

COMMISSION PURSUANT TO SECTION 40-3.2-204, THE AIR QUALITY CONTROL

PAGE 12-HOUSE BILL 10-1365
COMMISSION, IN RESPONSE TO THE PROPOSAL BY THE DEPARTMENT, SHALL

INITIATE A PROCEEDING TO INCORPORATE THE AIR QUALITY PROVISIONS OF

THE UTILITY PLAN INTO THE REGIONAL HAZE ELEMENT OF THE STATE

IMPLEMENTATION PLAN. EXCEPT AS SET FORTH IN THIS SUBSECTION (2), THE

AIR QUALITY CONTROL COMMISSION SHALL NOT ACT ON THE UTILITY PLAN

OR THE PROVISIONS OF THE REGIONAL HAZE ELEMENT OF THE STATE

IMPLEMENTATION PLAN THAT WOULD ESTABLISH CONTROLS FOR THOSE

UNITS COVERED BY THE UTILITY PLAN UNTIL AFTER THE COMMISSION'S

APPROVAL OF THE UTILITY PLAN.

(b) THE AIR QUALITY CONTROL COMMISSION SHALL VACATE THE

ENTIRE PROCEEDING RELATED TO THE UTILITY PLAN AND SHALL INITIATE A

NEW PROCEEDING FOR THE CONSIDERATION OF ALTERNATIVE PROPOSALS FOR

THE APPROPRIATE CONTROLS FOR THOSE UNITS COVERED BY THE UTILITY

PLAN FOR INCLUSION IN THE REGIONAL HAZE ELEMENT OF THE STATE

IMPLEMENTATION PLAN IF:

(I) THE COMMISSION DOES NOT APPROVE THE UTILITY PLAN BY

DECEMBER 15, 2010;

(II) THE UTILITY WITHDRAWS ITS APPLICATION PURSUANT TO

SECTION 40-3.2-205 (4); OR

(III) THE AIR QUALITY CONTROL COMMISSION REJECTS ANY PORTION

OF THE UTILITY PLAN AS APPROVED BY THE COMMISSION.

(c) THE AIR QUALITY CONTROL COMMISSION SHALL CONDUCT THE

PROCEEDINGS SPECIFIED IN THIS SUBSECTION (2) AFTER PUBLIC NOTICE AND

AN OPPORTUNITY FOR THE PUBLIC TO PARTICIPATE IN ACCORDANCE WITH

THE AIR QUALITY CONTROL COMMISSION'S PROCEDURES.

(3) IF THE FINAL APPROVED PROVISIONS OF THE STATE

IMPLEMENTATION PLAN ARE NOT CONSISTENT WITH THE AIR QUALITY

PROVISIONS OF THE UTILITY PLAN, THE UTILITY MAY FILE A REVISED UTILITY

PLAN WITH THE COMMISSION THAT MODIFIES THE ORIGINAL PLAN TO BE

CONSISTENT WITH THE FINAL APPROVED STATE IMPLEMENTATION PLAN. THE

REVISED UTILITY PLAN IS SUBJECT TO ALL OF THE REVIEW AND COST

RECOVERY PROVISIONS CONTAINED IN THIS PART 2. NOTWITHSTANDING ANY

REVISION REQUIRED TO THE UTILITY PLAN, THE UTILITY IS ENTITLED TO

FULLY RECOVER ANY COSTS IT PRUDENTLY INCURRED OR CONTRACTED TO

PAGE 13-HOUSE BILL 10-1365
INCUR UNDER THE ORIGINALLY APPROVED PLAN PRIOR TO THE PLAN'S

REVISION AND ANY COSTS INCURRED AS A RESULT OF ANY ENFORCEABLE

STATE IMPLEMENTATION PLAN OR OTHER AIR QUALITY REQUIREMENTS.

40-3.2-209. Early reductions. REDUCTIONS IN EMISSIONS

ACHIEVED PURSUANT TO THIS PART 2 THROUGH A COMPLIANCE STRATEGY

BEFORE SUCH REDUCTIONS ARE MANDATED UNDER FEDERAL LAW ARE

VOLUNTARY FOR PURPOSES OF DETERMINING EARLY REDUCTION CREDITS

UNDER FEDERAL LAW.

40-3.2-210. Exemption from limits on voluntary emission

reductions. THE LIMITS ON UTILITY EXPENDITURES ON VOLUNTARY

EMISSION REDUCTIONS IN SECTION 40-3.2-102 DO NOT APPLY TO UTILITY

EXPENDITURES UNDER A PLAN APPROVED BY THE COMMISSION UNDER THIS

PART 2.

SECTION 2. 40-6-111 (1), Colorado Revised Statutes, is amended

BY THE ADDITION OF A NEW PARAGRAPH to read:

40-6-111. Hearing on schedules - suspension - new rates -

rejection of tariffs. (1) (d) NOTWITHSTANDING ANY ORDER OF SUSPENSION

OF A PROPOSED INCREASE IN ELECTRIC, GAS, OR STEAM RATES UNDER THIS

SUBSECTION (1), AFTER JANUARY 1, 2012, THE COMMISSION MAY ORDER,

WITHOUT HEARING, INTERIM RATES, AT ANY LEVEL UP TO THE PROPOSED

NEW RATES, TO TAKE EFFECT NOT LATER THAN SIXTY DAYS AFTER THE

FILING FOR THE PROPOSED RATE INCREASE. IN MAKING A DETERMINATION

AS TO WHETHER TO ALLOW INTERIM RATES, THE COMMISSION SHALL

CONSIDER THE AMOUNT OF THE REVENUE DEFICIENCY PRESENTED BY THE

UTILITY AND THE EXTENT TO WHICH THIS DEFICIENCY WOULD ADVERSELY

AFFECT THE UTILITY DURING THE TIME PERIOD REQUIRED TO HOLD HEARINGS

ON THE SUSPENDED RATES.

SECTION 3. 40-6-111 (2) (a), Colorado Revised Statutes, is

amended to read:

40-6-111. Hearing on schedules - suspension - new rates -

rejection of tariffs. (2) (a) (I) If a hearing is held thereon, whether

completed before or after the expiration of the period of suspension, the

commission shall establish the rates, fares, tolls, rentals, charges,

classifications, contracts, practices, OR rules or regulations proposed, in

PAGE 14-HOUSE BILL 10-1365
whole or in part, or others in lieu thereof, which THAT it finds just and

reasonable. In making such finding in the case of a public utility other than

a rail carrier, the commission may consider current, future, or past test

periods or any reasonable combination thereof and any other factors which

THAT may affect the sufficiency or insufficiency of such rates, fares, tolls,

rentals, charges, or classifications during the period the same may be in

effect and may consider any factors which THAT influence an adequate

supply of energy, encourage energy conservation, or encourage renewable

energy development. THE COMMISSION SHALL CONSIDER THE

REASONABLENESS OF THE TEST PERIOD REVENUE REQUIREMENTS PRESENTED

BY THE UTILITY.

(II) IF THE RATES ESTABLISHED BY THE COMMISSION AFTER HEARING

ARE LOWER THAN ANY INTERIM RATES ESTABLISHED UNDER PARAGRAPH (d)

OF SUBSECTION (1) OF THIS SECTION, THEN THE COMMISSION SHALL ORDER

THE UTILITY TO RETURN TO CUSTOMERS ON THEIR UTILITY BILLS THROUGH

A NEGATIVE RATE RIDER THE DIFFERENCE BETWEEN THE TOTAL AMOUNT

THAT WOULD HAVE BEEN COLLECTED UNDER THE FINAL APPROVED RATES

AND THE AMOUNT COLLECTED UNDER THE INTERIM RATES FOR THE PERIOD

THAT THE INTERIM RATES WERE IN EFFECT, WITH INTEREST AT A RATE

ESTABLISHED BY THE COMMISSION.

(III) All such rates, fares, tolls, rentals, charges, classifications,

contracts, practices, OR rules or regulations not so suspended, on the

effective date thereof, which, in the case of a public utility other than a rail

carrier, shall not be less than thirty days from AFTER the time of filing the

same with the commission, or of such lesser time as the commission may

grant, shall go into effect and be the established and effective rates, fares,

tolls, rentals, charges, classifications, contracts, practices, AND rules and

regulations subject to the power of the commission, after a hearing on its

own motion or upon complaint, as provided in this article, to alter or modify

the same.

SECTION 4. Appropriation. (1) In addition to any other

appropriation, there is hereby appropriated, out of any moneys in the public

utilities commission fixed utility fund created in section 40-2-114, Colorado

Revised Statutes, not otherwise appropriated, to the department of

regulatory agencies, for allocation to the public utilities commission, for the

fiscal year beginning July 1, 2010, the sum of seventy-four thousand one

hundred fifteen dollars ($74,115) cash funds and 0.6 FTE, or so much

PAGE 15-HOUSE BILL 10-1365
thereof as may be necessary, for the implementation of this act.

(2) In addition to any other appropriation, there is hereby

appropriated to the department of law, for the fiscal year beginning July 1,

2010, the sum of thirteen thousand forty-one dollars ($13,041) and 0.1 FTE,

or so much thereof as may be necessary, for the provision of legal services

to the department of regulatory agencies related to the implementation of

this act. Said sum shall be from reappropriated funds received from the

department of regulatory agencies out of the appropriation made in

subsection (1) of this section.

SECTION 5. Applicability. This act shall apply to conduct

occurring on or after the effective date of this act.

SECTION 6. Safety clause. The general assembly hereby finds,

PAGE 16-HOUSE BILL 10-1365
determines, and declares that this act is necessary for the immediate

preservation of the public peace, health, and safety.

____________________________ ____________________________

Terrance D. Carroll Brandon C. Shaffer

SPEAKER OF THE HOUSE PRESIDENT OF

OF REPRESENTATIVES THE SENATE

____________________________ ____________________________

Marilyn Eddins Karen Goldman

CHIEF CLERK OF THE HOUSE SECRETARY OF

OF REPRESENTATIVES THE SENATE

 APPROVED________________________________________

 _________________________________________

 Bill Ritter, Jr.

 GOVERNOR OF THE STATE OF COLORADO

PAGE 17-HOUSE BILL 10-1365