Colorado PUC Approves Black Hills Clean Heat Plan, Mandates Statewide Beneficial Electrification

January 22, 2025

Colorado PUC Approves Black Hills Clean Heat Plan, Mandates Statewide Beneficial Electrification

Victory

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Landmark decision approves portfolio of resources focused on energy efficiency and beneficial electrification

Contacts

Josh Valentine, SWEEP, 303-304-7613, [email protected]

Perry Wheeler, Earthjustice, 202-792-6211, [email protected]

Yazmyn Pelaez, Rewiring America, 702-527-9638, [email protected]

Denver, CO-

Today, the Colorado Public Utilities Commission (PUC) concluded deliberations on Black Hills Colorado Gas' (BHCG) first Clean Heat Plan, marking a landmark decision that approves a portfolio of resources focused on energy efficiency and beneficial electrification. This is one of the first instances in the nation where a gas-only utility will be required to support electrification for all of its customers, such as replacing gas furnaces and water heaters with efficient electric heat pumps.

The approved plan includes a budget of $18.3 million for 2025 through 2027, with the vast majority of funds dedicated to building electrification and energy efficiency. In its deliberations, the PUC rejected portions of a settlement agreed to by BHCG and various state agencies. The PUC required the company to offer beneficial electrification to all of its customers, marking a significant step forward in reducing emissions and expanding access to clean energy solutions. The decision also dedicates the funding for energy efficiency to the weatherization of homes and businesses. The PUC also approved funding to study the feasibility of thermal energy networks, a small amount of funding for renewable natural gas, and funding to support advanced mobile leak detection.

"We know building electrification is the most effective, lowest-cost way to reduce gas system emissions as required to meet our state climate targets," said Justin Brant, Utility Program Director at SWEEP. "We are thrilled that the PUC is taking this critical first step to require a gas-only utility to invest in these resources and is rejecting the company's request to spend customer money on more costly solutions."

BHCG is the second-largest gas utility in Colorado, with customers throughout the state. Most of its customers are in Castle Rock, Monument, Montrose, Frederick, Firestone, and the Roaring Fork Valley. With this decision, the Commission found that beneficial electrification is the lowest-cost option available to a gas utility to reduce greenhouse gas emissions, setting a key precedent and signaling a significant shift in strategy for gas utilities toward cleaner, more sustainable energy solutions.

"The PUC sent a clear message that Colorado's gas-only utilities cannot opt-out of electrification, which is a crucial part of the clean energy transition," said Michael Hiatt, deputy managing attorney at Earthjustice who represents SWEEP in this case. "This decision should help Black Hills' customers electrify their homes and businesses by reducing the costs of installing clean energy technologies such as heat pumps and heat pump water heaters."

The inclusion of beneficial electrification was based on a portfolio developed by the Southwest Energy Efficiency Project (SWEEP) and Rewiring America. The PUC agreed with these organizations that BHCG significantly overstated the expected costs of electrification. The PUC relied on analysis conducted by Rewiring America showing that most of BHCG's customers will save money when upgrading their heating system from a gas furnace to a clean and efficient heat pump. This transition, when combined with weatherizing their home, represents a significant financial benefit for consumers while supporting the state's climate goals.

"This landmark decision highlights the power of household electrification to deliver cost-effective solutions for consumers while reducing greenhouse gas emissions," said Rebecca Curry, Sr. Manager of Western Regional Policy at Rewiring America. "By redirecting costly investments in the gas system and ensuring fair access to beneficial electrification incentives in Black Hills' gas-only service territory, the PUC has taken a vital step toward building a cleaner, more equitable energy future for Colorado. This is a win for consumers, Colorado's clean energy workforce, and public health."

The Clean Heat Plan process was created three years ago at the Colorado legislature with SB21-264, which sets enforceable climate pollution reduction targets for gas utilities. The Commission has already reached decisions on the first Clean Heat Plans for Xcel Energy and Atmos Energy. Investor-owned gas utilities are required to file updated Clean Heat Plans every four years, laying out their strategies to meet decreasing emission targets. A final written order in this proceeding is expected in the coming weeks.

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