Utility Regulation

Section 1 of the act requires the public utilities commission (commission), if relying on a discount rate when calculating the net present value of future carbon-based fuel costs as part of a utility's electric resource plan, to apply a discount rate that does not exceed the long-term rate of inflation. The commission is required to determine an appropriate rate of inflation specifically for fuel costs.

Section 2 requires the commission to establish rules to limit the amount of rate case expenses that an investor-owned electric or gas utility may recover from the utility's customers. In reviewing an investor-owned utility's application to modify base rates, the commission is required to certify that sufficient information is included in the application, including a comprehensive cost and revenue requirement analysis.

Section 3 prohibits an investor-owned electric or gas utility from recovering various costs from its customers, including:

• More than 50% of annual total compensation or of expense reimbursement for a utility's board of directors;
• Tax penalties or fines issued against the utility;
• Investor-relation expenses;
• Certain advertising and public relations expenses;
• Lobbying and other expenses intended to influence the outcome of local, state, or federal legislation or ballot measures;
• Charitable giving expenses;
• Certain organizational and membership dues;
• Certain political contributions or expenses;
• Travel, lodging, food, or beverage expenses for the utility's board of directors and officers;
• Gift or entertainment expenses;
• Expenses related to aircraft for a utility's board of directors and officers; and
• Expenses related to unregulated products or services sold or provided by a utility.

If an investor-owned utility recovers prohibited costs, the commission may assess a nonrecoverable penalty against the utility and is required to order the utility to refund the amount improperly recovered to its customers, plus interest.

An investor-owned utility is required to file an annual report with the commission on the utility's compliance with the cost recovery prohibitions, which report must include the purpose, payee, and amount of any expenses associated with costs and activities not permitted to be recovered from customers.

Section 4 requires that, on or before November 1, 2023, an investor-owned gas utility file with the commission for the commission's approval, amendment, or denial a gas price risk management plan that includes proposals for addressing the volatility of fuel costs recovered from the utility's customers pursuant to the utility's gas cost adjustment filings.

Section 4 requires the commission to adopt rules, on or before January 1, 2025, to help protect investor-owned electric or gas utility customers from the volatility of gas prices by establishing mechanisms that align an investor-owned utility's financial incentives with the financial interests of its customers regarding incurred fuel costs. In adopting the rules, the commission is required to consider mechanisms to create a financial incentive for an investor-owned utility to improve its electricity production cost efficiency while minimizing its fuel costs.

As part of its rules, the commission shall also consider, to the extent such information is relevant, each investor-owned electric or gas utility's financial health and corresponding impacts on customer affordability.

Section 4 also requires the commission to open a proceeding to investigate whether and how residential and other development in certain geographic areas drive natural gas infrastructure costs for any natural gas utility that serves more than 500,000 customers in the state. After completing the investigation, the commission shall consider whether alternative infrastructure, service investments, or other actions by the utility could mitigate impacts of such development on nonparticipating or income-qualified utility customers.

Section 5 requires:

• On or before December 31, 2023, each regulated gas utility to remove from the utility's rate tariffs incentives offered to an applicant applying for natural gas service to establish gas service to a property;
• The Colorado energy office to contract with an independent third party, on or before July 1, 2024, to evaluate the risk that stranded or underutilized natural gas infrastructure investments pose, including the risk posed to utility employees and contractors, and the annual projected rate impact that such stranded assets have on utility customers;
• The commission to determine whether any changes to rules or depreciation schedules are warranted based on its review of the evaluation contracted by the Colorado energy office;
• An investor-owned gas utility to provide the commission information, including a map, about the utility's gas distribution system pipes;
• An investor-owned gas utility to refrain from penalizing or charging a fee to a customer that voluntarily terminates gas service. The commission may adopt rules to establish standards for a customer's voluntary disconnection from an investor-owned gas utility's gas distribution system.
• On or before January 1, 2024, the commission to examine existing investor-owned electric utility tariffs, policies, and practices to determine if they pose a barrier to the beneficial electrification of transportation and buildings and determine whether requiring a customer that seeks to interconnect distributed energy resources or beneficial electrification resources to bear the full incremental cost of transformer or service upgrades needed for such interconnection imposes an undue burden on the customer.

Section 6 requires the commission to allow a wholesale customer of an investor-owned utility to intervene in a proceeding regarding the commission's consideration of the investor-owned utility's application for cost recovery from customers if the wholesale customer has a demonstrated interest in the proceeding.

Section 7 appropriates for the 2023-24 state fiscal year:

• $1,347,554 from the public utilities commission fixed utility fund to the department of regulatory agencies for use by the commission, with $713,745 reappropriated to the department of law; and
• $142,749 to the department of law from the legal services cash fund from revenue received from the Colorado energy office that originates as custodial federal funds that the office has authority to expend.

APPROVED by Governor May 11, 2023

EFFECTIVE August 7, 2023

NOTE: This act was passed without a safety clause and takes effect 90 days after sine die.
(Note: This summary applies to this bill as enacted.)