2023 Colorado Revised Statutes › Title 40 - UTILITIES (§§ 40-1-101 — 40-43-104) › PUBLIC UTILITIES (§§ 40-1-101 — 40-17.5-105) › GENERAL AND ADMINISTRATIVE (§§ 40-1-101 — 40-9.8-104) › Article 3.2 - AIR QUALITY IMPROVEMENT COSTS (§§ 40-3.2-101 — 40-3.2-210) › Part 1 - GENERAL PROVISIONS (§§ 40-3.2-101 — 40-3.2-110) › Section 40-3.2-103 - Gas distribution utility demand-side management programs - recovery of costs - reports

(1)
Commencing in 2022 and no less frequently than every four years thereafter, each investor-owned gas distribution utility, also referred to in this section as a "gas utility", shall file an application to open a DSM strategic issues proceeding to develop energy savings targets to be achieved by the gas utility, taking into account its potential for cost-effective demand-side management as well as Colorado's greenhouse gas reduction goals. The commission shall, as part of approving a gas utility's gas DSM strategic issues application, also develop an estimated DSM budget commensurate with natural gas savings targets, funding and cost-recovery mechanisms, and a financial bonus structure for DSM programs implemented by a gas utility.
(2)
As part of the development of targets, mechanisms, and a bonus structure required by subsection (1) of this section, the commission shall:
(a)
Adopt an estimated budget for DSM program expenditures commensurate with the energy savings targets established by the commission;
(b)
Establish DSM program energy savings targets that are consistent with achieving the greenhouse gas reduction targets in section
25-7-102(2)(g)
, take into consideration new clean energy technologies as contemplated by section
40-2-123
, and reflect the maximum cost-effective and achievable natural gas savings potential for the gas utility consistent with the needs of its full-service customers;
(c)
(I)
(A)
Adopt procedures for allowing gas utilities to recover their prudently incurred costs of DSM programs without having to file a rate case. Such costs shall include, but are not limited to, facility investments; rebates; interest rate buy-downs; incremental labor costs, employee benefits, carrying costs, and employee-related administrative costs; and other administrative costs. All such costs shall be recovered through a cost adjustment mechanism that is set on an annual basis, or more frequently if deemed appropriate.
(B)
Labor costs shall reflect, and the commission shall require, compliance with all applicable labor standards set forth in section
40-3.2-105.5
.
(II)
Cost adjustment procedures shall give gas utilities the option of obtaining cost recovery either through expensing DSM program expenditures or adding them to base rates, with an amortization period to be determined by the commission. In addition, such procedures shall provide that cost recovery for programs directed at residential customers are to be collected from residential customers only and that cost recovery for programs directed at nonresidential customers are to be collected from nonresidential customers only.
(d)
Adopt a bonus structure to reward gas utilities for investments in cost-effective DSM programs. For each year of operation, the bonus shall be capped at twenty-five percent of the expenditures or twenty percent of the net economic benefits of the DSM programs, whichever amount is lower. The amount of the bonus awarded each year shall be determined based on the extent to which the gas utility has achieved the targets established by the commission in accordance with paragraphs (a) and (b) of this subsection (2). The bonus shall not count against a gas utility's authorized rate of return or be considered in rate proceedings.
(e)
Consider the fact that implementing the new DSM programs may require a phase-in period before a gas utility is able to achieve the funding level determined by the commission pursuant to paragraph (a) of this subsection (2). A gas utility that implements a new DSM program in phases shall be eligible to receive a bonus under the bonus structure adopted pursuant to paragraph (d) of this subsection (2) during its phase-in period.
(f)
Not adopt any measure authorizing a financial penalty against a gas utility that fails to meet the targets in any particular year.
(2.5)
For gas utilities with fewer than two hundred fifty thousand full-service customers, the commission may establish energy savings targets, a budget for gas DSM program expenditures, funding and cost-recovery mechanisms, and a financial bonus structure in the same proceeding in which the utility's gas DSM program plan is submitted for approval.
(3)
After the development of the targets, mechanisms, and bonus structure as described in subsection (1) of this section, each gas utility shall:
(a)
(I)
Develop gas DSM program plans designed to meet or exceed the energy savings targets established by the commission.
(II)
Gas DSM program plans may be combined with electric DSM program plans, beneficial electrification plans, or other plans that reduce energy consumption or greenhouse gas emissions. Except as otherwise provided in subsections (3)(a)(III) and (3)(a)(IV) of this section, one or more of the gas DSM programs or measures, representing an aggregate total of at least twenty-five percent of overall residential gas DSM program expenditures, including expenditures serving income-qualified households, must be targeted to residential customers in income-qualified households.
(III)
In the case of a gas utility with fewer than fifty thousand full-service customers, and except as otherwise provided in subsection (3)(a)(IV) of this section, one or more of the gas DSM programs or measures, representing an aggregate total of at least fifteen percent of overall residential gas DSM program expenditures, including expenditures serving income-qualified households, must be targeted to residential customers in income-qualified households.
(IV)
On or after January 1, 2026, the commission may commence proceedings to adjust the percentage specified in subsection (3)(a)(II) or (3)(a)(III) of this section in light of changed circumstances, so long as the resulting percentages represent a significant portion of gas DSM program expenditures and continue to make progress toward achievement of Colorado's energy efficiency and greenhouse gas emission reduction goals.
(b)
In implementing approved DSM programs, use reasonable efforts to maximize energy savings consistent with the annual energy efficiency budget.
(3.5)
(a)
To meet the energy savings targets established by the commission in accordance with this section, gas utilities shall consider including incentives for customers to utilize behind-the-meter thermal renewable sources. The commission shall not prohibit gas utilities from offering programs or incentives that encourage customers to replace gas-fueled appliances with efficient electric appliances.
(b)
The commission shall not require the removal of gas-fueled appliances or equipment from an existing structure nor ban the installation of gas service lines to any new structure.
(4)
In implementing DSM programs, gas utilities may spend a disproportionate share of total expenditures on one or more classes of customers.
(5)
(a)
The commission shall authorize each gas utility to recover money spent for education programs, impact and process evaluations, and program planning related to natural gas DSM programs offered by the gas utility without having to show that such expenditures, on an independent basis, are cost-effective. The commission may limit the amount spent for these activities.
(b)
(I)
Upon petition by a regulated gas utility, the commission shall remove disincentives to the implementation of effective gas DSM programs through the adoption of a rate adjustment mechanism that ensures that the revenue per customer approved by the commission in a general rate case proceeding is recovered by the gas utility without regard to the quantity of natural gas actually sold by the gas utility after the date the rate took effect. The commission shall separately calculate, for the rate class or classes to which a rate adjustment mechanism applies, the regulatory disincentives removed through that mechanism and collected or refunded by the gas utility through a tariff rider.
(II)
Removing disincentives through a rate adjustment mechanism adopted pursuant to subsection (5)(b)(I) of this section does not preclude a gas utility from receiving a bonus pursuant to subsection (2)(d) of this section.
(III)
The commission shall not reduce a gas utility's return on equity based solely on approval of a rate adjustment mechanism adopted pursuant to subsection (5)(b)(I) of this section.
(6)
(a)
Gas utilities shall submit annual reports to the commission, as determined by the commission by rule. The annual report shall describe the gas utility's DSM programs and shall document program expenditures, energy savings impacts and the techniques used to estimate these impacts, the estimated cost-effectiveness of program expenditures, and any other information the commission may require.
(b)
The commission shall review each report submitted pursuant to paragraph (a) of this subsection (6) and shall determine the level of bonus, if any, that the gas utility is eligible to collect on the basis of the information included in the report. The commission's determination shall be made within three months after receiving the report. Any such bonus shall be authorized as a supplement to the cost adjustment mechanism or alternative mechanism approved by the commission and shall be applied over a twelve-month period after approval of the bonus.
(7)
Gas utilities may continue DSM programs that were in existence on or before May 22, 2007, and shall not be required to obtain approval from the commission for such programs.
(8)
This section shall not be construed to extend the commission's authority to any nonregulated utility businesses or affiliates of a gas utility.
Amended by 2021 Ch. 330,§4, eff. 9/7/2021.
L. 2007: Entire section added, p. 984, § 3, effective May 22. L. 2021: (1), IP(2), (2)(a), (2)(b), (2)(c)(I), (3), and (5) amended and (2.5) and (3.5) added, (HB 21-1238), ch. 2133, p. 2133, § 4, effective September 7.
Section 8 of chapter 330 (HB 21-1238), Session Laws of Colorado 2021, provides that the act changing this section applies to plans, applications, or other documents reviewed by the public utilities commission on or after September 7, 2021.
2021 Ch. 330, was passed without a safety clause. See Colo. Const. art. V, § 1(3).
(1) For the definition of DSM programs, see §40-1-102. (2) For the legislative declaration in HB 21-1238, see section 1 of chapter 330, Session Laws of Colorado 2021.