December 2022 – Colorado Policy Update

BPA tracks the latest policy updates and legislative issues in many states across the nation. See the latest policy information for Colorado as of December 2022.

Disclaimer: Inclusion of any bills/regulations in this state policy update does not equate to BPA’s endorsement.

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The Colorado Public Utilities Commission (PUC) continues to hold public meetings on the development of Clean Heat Plans that are required from each state utility in 2023 to reduce the greenhouse gas emissions associated with providing fuel to homes and businesses by 22% by 2030 including through beneficial electrification and demand-side management programs (more details below).

Meanwhile, the Colorado legislature wrapped up its 2022 session in May and the Governor signed several important energy efficiency bills into law that took effect on July 1. Of note, HB22-1362 was signed by the Governor in early June requiring cities and counties to adopt statewide building codes that ensure all new residential, commercial, and public buildings are ready for all-electric heating and cooling systems and can meet or exceed energy performance standards under the 2021 International Energy Conservation Code (IECC), with $4 million for the Colorado Energy Office to provide training and financial assistance to local governments, builders, and contractors to implement new energy codes. The new law also provides over $20 million to provide grants for the installation of high-efficiency electric heating and cooling in homes and buildings. (See full details on the bill below.)

Governor Polis also signed a new bill into law that creates an income tax credit for the purchase of heat pumps, heat pump water heaters, and exempts “decarbonizing building materials” (to be defined by the Office of the State Architect) from the state sales and use taxes. The heat pump tax credit will be for 10% of the system purchase price and will take effect for tax years 2023 through 2032.

Regulatory Monitor:

• In October, Colorado PUC continued public hearings on the development of Clean Heat Plans, which are mandated by state law passed in 2021 to reduce the greenhouse gas emissions associated with providing fuel to homes and businesses by 22% by 2030 including through beneficial electrification and demand-side management programs (more details on SB 21-264 below). Public stakeholder meetings came after PUC released proposed rules in 2021 for each utility to develop and file their plans including details to deploy high-efficiency electric heating and cooling systems and to establish minimum spending levels for demand-side management programs including rebates for efficient appliances, building upgrades, and smart devices. PUC has since held multiple workshops and public comment hearings and is anticipating final rules on the Clean Heat Plans by December 2022. By August 2023, utilities must submit Clean Heat Plans to comply with emissions reductions requirements outlined above.
• Colorado PUC held a public hearing on August 31 to consider the Public Service Company of Colorado (PSCo) Distribution System Plan (DSP), submitted every year to the PUC “to demonstrate cost effective delivery of electric service to Colorado customers” and is used to help PSCo meet company commitments to achieve net zero emissions by 2050. In the 2022 DSP, PSCo requests approval to launch a new “demand response management system (DRMS) software platform to integrate multiple types of distributed energy resources (DER) and dispatch these assets including advanced metering infrastructure, smart thermostats, demand response, and battery storage.” If approved by PUC, PSCo would put out a Request For Proposal to develop the DRMS platform over the next 12 months with a goal to implement the new system in 2024. Colorado PUC continues to take public comment on the PSCo’s DSP filing and has not released a schedule for further action after the public hearing at the end of August.

Legislative Monitor:

2022 Regular Session Dates: January 12 until May 11

Bills that passed in 2022:

• HB22-1362 Efficient Building Codes requires the Colorado Energy Office (CEO) to produce model building code language for new residential, commercial, and public buildings that cities and counties must adopt by 2030. The codes must include electric-ready language so that buildings are equipped to use all-electric heating and cooling, solar panels, and EV chargers and to meet or exceed the 2021 IECC. To implement these codes, the bill provides $4 million for CEO to issue grants and provide training related to the 2021 international energy conservation code, electric and solar ready codes, and low energy and carbon codes. The bill also provides $11 million for CEO to establish a program to provide grants to housing developers, public universities, nonprofits, utilities, and local governments for the installation of high-efficiency electric heating/cooling equipment with at least 30% of funding devoted to installations in low-income communities and an additional $10 million for the installation of high-efficiency electric heating/cooling equipment in public buildings. After passing the legislature on May 20, the bill was presented to the Governor who is anticipated to sign HB22-1262 into law. On June 2, the Governor signed HB22-1362 into law and it took effect July 1.
• SB22-051 Policies to Reduce Emissions from Built Environment promotes air-source, ground-source, and water-source heat pump purchases for commercial and residential users by allowing an income tax credit equal to 10% of the purchase price. To receive the incentive, the purchaser must assign the credit to the seller of the heat pumps at the time of purchase. The seller will compensate the purchaser for the full nominal value of the tax credit at the time of sale. The tax credit will be available from 2023 through January 1, 2033. Beginning July 1, 2024, the bill also exempts from state sales and use tax all sales, storage, and use of “eligible decarbonizing building materials”, defined as building materials that have a maximum acceptable global warming potential as determined by the office of the state architect. The office of the state architect will compile a list of eligible materials. The bill passed the House on and was subsequently approved in the Senate on May 10. The Governor has not taken action on this legislation at the time of this writing. On June 2, the Governor signed SB22-051 into law and the new tax credit will be available beginning in fiscal year 2023.

Bills considered but not passed in 2022:

• SB 22-138 Reduce Greenhouse Gas Emissions in Colorado would have added new incremental emissions reductions goals to existing targets. The proposed bill would require two additional incremental goals, 65% reductions in greenhouse gas emissions of 2005 levels by 2035, and 75% by 2040. Currently, Colorado must achieve emissions reductions of 26% by 2025 of 2005 levels, 50% by 2030, and 90% by 2050.
• HB 22-1020 Consumer Right to Use would prohibit state agencies and local governments from banning the use of natural gas, propane, or renewable sources for electricity generation, cooking, space heating, and water heating in residential, multi-family residential, and commercial buildings.