United States: Energy Legislation in the 2017 Colorado General Assembly

The First Regular Session of the Seventy-First General Assembly adjourned sine die on May 10th, wrapping up 120 days of work for the people of Colorado. The session was primarily dominated by two big issues: budget and transportation. After years of debate, legislators reached a compromise on the infamous hospital provider fee. By moving the fee into an enterprise fund, legislators were able to free several hundred million dollars in the budget, and thus avoid devastating cuts to rural hospitals. On the other hand, legislators were unable to reach a compromise on a proposed measure to refer a tax increase to the voters for increased transportation funding.

In terms of energy legislation, we saw dozens of bills on a range of topics, including electric utilities, oil and gas, and reauthorization of the Colorado Energy Office. The following offers a brief overview of the bills debated during the session.

Utilities

Democrats and Republicans found some common ground this session: investor owned utilities (IOUs) need further regulation. Spurred on by recent rate increases in southern Colorado, a bipartisan group of lawmakers called for greater transparency for ratepayers. In fact, legislators are becoming so frustrated that even once-hushed discussions about deregulation are growing louder in the Capitol. Though we did not see deregulation legislation this year, it may not remain a philosophical debate for much longer.

Transparency

As mentioned above, legislators continue to hear concerns from constituents that their rates are increasing. Rather than fight a rate battle, lawmakers chose to shine some light on utilities, and provide customers with more information about how their bills are calculated.  Senate Bill 105 (Consumer Right to Know Electric Utility Charges) aims to do just that. This bill requires IOUs to file with the Public Utilities Commission (PUC) (for its review) a comprehensive billing format that the IOU has developed for its customers. The billing format must include certain information, including a line-item representation of all monthly charges and indication of whether the charges have increased, rate and usage for the current month and previous twelve months, percentages of fuel sources, and other information.

In some cases, as with House Bills 1227 and 1116, legislators did find some success with measures to help defray or reduce costs for ratepayers.  House Bill 1227 (Electric Demand-side Management Program Extension) extends the demand-side management goals (reduction of peak demand by at least 5%) for IOUs for an additional ten years.  House Bill 1116 (Continue Low-income Household Energy Assistance) extends funding for several programs that provide energy assistance to low-income households.  Senate Bill 179 (Fee Limits for Solar Energy Device Installations) offered good news for net metering customers.  The bill limits the amount of fees that can be assessed by a government entity for allowing solar energy device installations.

Other bills involving transparency include:

  • SB 271 – Investor-Owned Utility Cost Recover Transparency – passed. This bill requires the PUC to open a nonadjudicatory proceeding to evaluate IOU policies and procedures for extension of service, and allocation of costs and identification of variables that affect construction and implementation time lines for extension of service.
  • HB 1323 – PUC Commissioner Qualifications and Ethics Ombudsman – failed. This bill would have prohibited a person with recent connections to a regulated utility from serving on the PUC, appointed an ethics ombudsman, and required periodic audits.

"Utility of the Future"

Just as utilities and legislatures around the country are considering technological advancements, regulatory pressures, changing consumer behaviors, and other market dynamics shaping the future of the electric utility industry, Colorado lawmakers are also taking a longer-term look at energy use in Colorado.  However, consensus on the future of the electric utility industry is yet to be found.  Senate Bill 089 (Allow Electric Utility Customers to Install Energy Storage Equipment), which would have allowed, and required the PUC to adopt rules for, customers to install and use electricity storage systems on their property, failed.  Another energy storage related bill, House Bill 1299 (Utility Integration of Energy Storage Resources), which would have directed the Transportation Legislation Review Committee (TLRC) to hold a hearing regarding the integration of energy storage into the electric resource planning process for public utilities, also failed.  House Bill 1225 (Electric Regional Transmission Organization Hearing) directing TLRC to hold a hearing regarding the effects that an electric utility's participation in a regional transmission organization would have in Colorado failed as well.

When the General Assembly convenes again in January we expect to see bills regarding identification of underground facilities, provision of infrastructure for alternative fuel vehicles by utilities, electric grid planning, and ratepayer bonds for the retirement of certain production facilities.

Oil and Gas

As you might expect, not much legislation in the world of oil and gas passed Colorado's split legislature. The battle lines remain relatively recognizable: Democrats want more regulation, and Republicans don't. During the deliberations over House Bill 1372, for instance, Republican lawmakers railed about the opportunism Democrats were exhibiting, calling it unnecessary restraint on the industry.

Transparency

As with utilities, legislators continue to seek greater transparency from operators in Colorado. House Bill 1372, known as the pipeline location bill, is an obvious response to a tragic public event, but other bills, such as House Bill 1336, were more narrowly tailored to specific instances in which operators (according to some) could be more open. Nevertheless, neither bill managed to overcome the legislative hurdles.

About a week before the legislature was set to adjourn, a home exploded in northern Colorado, killing two people inside. Investigators believe that gas seeped into the home from a cut pipeline running about six feet from the house (the well sits 178 feet from the house). As a result, legislators introduced House Bill 1372 (Oil and Gas Operators Disclose Pipe Location Development Plans), which would have required oil and gas operators to disclose the location of subsurface facilities, and share development plans with local governments.  The bill failed.  Nevertheless, legislators plan to hold meetings over the summer about whether something like this might be necessary next year.

House Bill 1336 (Additional Protections Forced Pooling Order) failed as well.  Current law allows forced pooling, which is a process by which oil and gas operators can pool oil and gas resources within a particular drilling unit. The Oil and Gas Conservation Commission can issue an order to force an owner who has not consented to development to allow the operator to produce the oil and gas (despite the lack of consent). This bill would have made several changes to those forced pooling orders.

Setbacks

Legislators again attempted to address oil and gas setbacks – the minimum distance between oil and gas operations and various structures, roads, etc.  Current law requires oil and gas operations to be located at least 1,000 feet from a school.  House Bill 1256 (Oil and Gas Facilities Distance from School Property), which would have clarified that the setback requirement is from the school property line, and not the physical building, failed.

Pro-Industry

Not all of the oil and gas bills were meant to increase regulation on the industry. Republicans did make several attempts to improve the legal and regulatory framework in Colorado, from the more narrow (SB 035), to the more sweeping (SB 301). As you might imagine, not much got done. Senate Bill 035 (Tampering with Oil and Gas Equipment), which would have increased penalties for tampering with equipment used for oil and gas gathering operations, failed.  House Bill 1124 (Local Government Liable Fracking Ban Oil and Gas Moratorium), which would have required a local government that bans fracking to compensate mineral owners, also failed.

Colorado Energy Office

Legislation requiring to reauthorize and continue operations of the Colorado Energy Office (CEO) became a battleground for a host of energy-related, partisan agendas.  Senate Bill 17-301, broadly titled "Concerning Energy-Related Statutes," failed when negotiations on a compromise stalled about four hours before the constitutionally-mandated deadline for the legislature to adjourn. As introduced, this bill would have:

  • Annually transferred $3.1 million to the CEO in the Office of the Governor from the General Fund for four years from FY 2017-18 through FY 2020-21;
  • Increased annual registration fees for plug-in electric vehicles by $35 per vehicle, to be deposited into the Highway Users Tax Fund (HUTF);
  • Required the PUC to adopt rules related to investor-owned utility interests in Colorado-based natural gas reserves;
  • Required the CEO and the Department of Natural Resources (DNR) to form a stakeholder group to address funding shortfalls related to abandoned oil and gas wells.
  • Repealed several defunct energy-related statutes in the CEO; and
  • Finally, the bill made changes to the Property Assessed Clean Energy program.

The bill was substantially amended (on the second-to-last day of session) in the House to:

  • Annually transfer $2.1 million from the General Fund to the CEO in the Office of the Governor from FY 2017-18 through FY 2020-21;
  • Repeal several defunct energy-related statutes in the CEO; and
  • Finally, make changes to the Property Assessed Clean Energy program.

Despite protracted negotiations, the bill ultimately failed.  As a result, the CEO is somewhat in limbo. Governor Hickenlooper has publicly stated that he is considering calling legislators back for a special session. However, Republicans have hinted that outcomes likely would not be different, and thus a special session would not be productive. The Office was not closed, rather it does not have adequate funding to meet its purpose. So, one possibility would be to seek funding from the Joint Budget Committee during the supplemental process, rather than seek proactive legislation next session. Regardless of the specific track the administration takes, we should know within the next few days to a week whether legislators will get another crack at funding, and potentially changing, the CEO.

The Future of Energy Legislation in Colorado

So where do we go from here? While we expect for some of the traditional debates to continue (traditional energy resources vs. renewables, for instance), we also anticipate that utility legislation in particular will continue to shift towards greater protection for ratepayers. As we approach the coming election year, there will be an increased emphasis on messaging bills meant to motivate base voters and bring about any chance for a gaffe that can be used against a legislator in a campaign. Should Democrats take control of the Senate (and hold the Governor's office), the "utility of the future" bills are likely be front and center.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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