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Summary
According to the Energy Information Administration, Colorado utilities spent $15.3 million on energy efficiency in 2007, saving 147,142 MWh. The Public Utilities Commission (PUC) has authorized Xcel Energy, operating as the Public Service Company of Colorado (PSCo), to expand its demand-side management (DSM) programs. These programs are anticipated to reduce electricity use by 11.5% by 2020. Colorado’s State Energy Program (SEP) will receive $46 million from the American Reinvestment and Recovery Act of 2009 (ARRA).
To alleviate climate change, the governor of Colorado signed Executive Order 408 in 2008 to set statewide goals for reducing greenhouse gas emissions. The order requires that Colorado reduce its greenhouse gas emissions to 20% below 2005 levels by 2050. The order also requires utilities to reduce their greenhouse gas emissions by 20% below 2005 levels by 2020. The City of Boulder has also implemented its own climate action plan.
Colorado’s utilities administer energy efficiency programs under a regulated structure with oversight by the PUC. A House Bill required the PUC to establish energy savings goals for gas and electric utilities and to give investor-owned utilities a financial incentive for implementing cost-effective efficiency programs. The utilities recover the program costs of the plans approved by the PUC by using tariff riders, which adjust customer bills.
Colorado initiated natural gas decoupling in 2007 and implemented it in 2008. There are no decoupling options for electric utilities. (Decoupling reduces the financial disincentive for utilities to support energy efficiency by separating utilities’ profits from their levels of sales.) The PUC has created incentives to reward utilities that create efficiency programs for electricity and/or natural gas.
The Southwest Energy Efficiency Project (SWEEP) released a study in 2009 called Energy Efficiency and Job Creation in Colorado. The study reported that energy efficiency improvements could create an additional 11,600 jobs in Colorado by 2025.
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| Customer Energy Efficiency Programs |
Xcel Energy/PSCo is the major investor-owned utility in Colorado. Xcel Energy/PSCo administers its programs after receiving approval from the Colorado Public Utilities Commission. In 2007, Xcel Energy/PSCo implemented five residential and ten non-residential DSM programs, spending $17.8 million and achieving about 42 MW of peak demand reduction and 127 GWh of energy savings. In total, Colorado's utilities saved 147 GWh in 2007 according to the Energy Information Administration, 0.22% of total retail electricity sales.
In 2007, House Bill 07-1037 directed the PUC to set energy savings goals for electric utilities and to create financial incentives for cost-effective efficiency programs. In 2008, the PUC set goals for Xcel Energy/PSCo. These goals call for the utility to help its customers reduce their electricity use in 2020 to about 11.5% less than their energy use during 2009. The programs are expected to save 3,669 GWh.
In 2009, the federal government approved economic stimulus funding to support energy efficiency in Colorado. Colorado plans to use this funding to explore changing rate structures, provide public education about energy issues, create long-term plans, reduce the peak demand for energy, partner with utilities to manage their energy sources, study the feasibility of projects, and introduce energy-efficient technologies.
House Bill 1164 now requires the PUC to include the possible impacts of future greenhouse gas regulation on electricity prices when evaluating utility resource plans.
Natural gas programs are also available in Colorado. In 2007, House Bill 07-1037 required that the Colorado Public Utilities Commission set energy savings goals for natural gas. The Consortium for Energy Efficiency (CEE) reported that Colorado utilities budgeted $2.6 million in 2006 and 2007 and $2.2 million in 2008 for natural gas programs.
Atmos Energy, a natural gas utility, estimated that there is an economic potential to reduce natural gas usage in Colorado by 3 to 4 million dekatherms between 2009 and 2013. The utility reported a total natural gas consumption of 12 million dekatherms in 2008. The achievable potential is likely to be somewhat lower than the economic potential.
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Funding for energy efficiency is increasing rapidly in Colorado. Xcel Energy/PSCo’s programs are funded by a demand-side management Cost Adjustment Mechanism rate rider. In 2007, Xcel Energy/PSCo spent close to $20 million on electric energy efficiency programs. According to the Southwest Energy Efficiency Project (SWEEP), Xcel Energy/PSCo plans to ramp up its investment in DSM programs from $63 million in 2009 to $80 million in 2020. Xcel Energy/PSCo estimated that its customers will gain $450 million in net economic benefits from these programs. According to the Energy Information Administration, Colorado utilities spent $15.3 million on energy efficiency in 2007, 0.31% of total spending.
Atmos Energy has budgeted $565,000 for natural gas programs in 2009 and $691,000 in 2010. The company reported that this total budget exceeds state requirements by 10%.
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| Energy Efficiency Resource Standard |
Based on HB 07-1037, the PUC must establish energy savings goals for retail electric and gas utilities. The targets for Xcel Energy (PSCo) and Black Hills begin at 0.53 percent of energy sales reduced in 2009, increasing to a cumulative 11.5 percent of energy sales reduced in 2020. Although incentive mechanisms are in place to encourage achievement of planned goals, there do not appear to be any penalties for not reaching goals.
HB 07-1037 requires the PUC to approve natural gas saving and spending targets. A modified PSCo plan was approved on November 28, 2008. Between 2009 and 2010, PSCo’s natural gas programs plan to save about 721 billion BTUs. Atmos, Black Hills, Colorado Natural Gas (CNG) and SourceGas filed natural gas DSM plans on September 29, 2008. Modified plans were approved on December 30, 2008, for Atmos, CNG and SourceGas. Black Hills’ plan was approved on April 8, 2009 and is set to begin in May, 2009. Eastern Colorado Utility Co., which was granted an extension and filed December 3, 2008, has a plan currently pending before the PUC.
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On June 18, 2007, the Public Utilities Commission approved a partial revenue decoupling adjustment for residential gas customers as part of a three-year pilot program. The proposed mechanism is implemented through a rider applied to the company’s base rate gas service revenues to compensate for the prior year’s changes in weather-normalized use per customer. This is a three-year pilot program, initially set to run from October 1, 2008 to September 30, 2011. If revenue per residential customer declines more than 1.3% per year, the rate adjustment is updated to recover reduced weather-normalized revenues due to reduced usage per customer. This value (1.3%) was chosen because it equals 1/2 of the historic rate of decline referenced in PSCo’s testimony. (Docket Nos: 06S-655G and 08L-413G)
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| Reward Structures for Successful Energy Efficiency Programs |
The PUC implemented a performance-based incentive, enabling PSCo to earn a profit on its DSM expenditures as long as it achieves at least 80% of its energy savings goal in any one year. PSCo is also allowed to recover the costs for its DSM programs. The incentive is tied to energy savings achieved and the net economic benefits of the programs. The incentive is capped at 20% of PSCo’s DSM expenditures. Black Hills has adopted the same mechanism.
For natural gas utilities, the incentive bonus is capped at 25% of the expenditures or 20% of the net economic benefits of the DSM programs, whichever amount is lower.
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| Energy Efficiency as a Resource |
Energy efficiency is not included within the Commission’s definition of a supply-side resource in the Rules Regulating Electric Utilities. However, least cost utility planning rules in Colorado require both electric IOUs to
consider both demand and supply options and develop an overall least cost
resource plan that is reviewed and approved by the PUC. In Public Service Company’s recent Electric Resource Plan filing, it appears that the commission required the company to modify its plan to include modeling for approved DSM programs. (Docket No. 07A-447E, Decision No. C08-0929).
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Last Updated
10/19/2009
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