One year after approving Colorado’s first “clean heat plan” to reduce climate pollution in natural gas systems, state utility regulators are weighing the impact of federal clean energy rollbacks on their goals.

Roughly 10 percent of statewide greenhouse gas emissions comes from gas-burning heating and cooking appliances in Colorado homes and businesses. Under a first-of-its-kind 2021 state law, utilities are required to file clean heat plans outlining their efforts — mostly through investment and customer incentives for technologies like electric heat pumps — to meet emissions reduction targets.

But as the Colorado Public Utilities Commission nears a deadline to set a target for 2035, utility companies and environmental advocates are at odds over how ambitious the state should be in the absence of federal incentives. Republicans’ sweeping tax and spending bill this year fully repealed tax credits for home electrification and energy efficiency upgrades that were passed under President Joe Biden’s administration.

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Led by Xcel Energy, Colorado’s largest electricity and natural gas provider, utilities have asked the three-member PUC to target a maximum 2035 cut of 30 percent below 2015 levels. A coalition of climate and environmental groups want a much more ambitious target of a 55 percent cut— and so does at least one sponsor of the 2021 clean heat law.

“We need to keep pushing this, because the technology is out there, but we’re seeing such huge changes in our climate right now,” former Democratic state Representative Tracey Bernett told the commission in a Sept. 18 public hearing. “We’ve got to do something sooner, and reducing (natural gas) is the quickest way we can do it.”

Recovered methane is not going to help. We need to electrify ... We especially need to electrify in communities like mine, where they need to transition first, because we are the most vulnerable.

In a PUC filing last month, Governor Jared Polis’ administration initially proposed a middle-of-the-road 41 percent target for 2035. Just weeks later, however, the Colorado Energy Office and the Air Pollution Control Division weakened their proposal in an updated filing, endorsing a 31 percent target nearly in line with what Xcel had requested.

“What we’ve brought forward in our additional comments, in our mind, is a balance of ambition with potential achievability and cost of that transition,” Keith Hay, the energy office’s managing director for policy, told the PUC.

That target could be revised in the coming years depending on changing market conditions, he added.

“Thirty-one percent represents a real ambition, in our view, for the utilities. At the same time, there’s a lot of concern about that not being ambitious enough,” Hay said. “The commission can set that ambitious target today and come back in the 2030 timeframe, and really look at where we as a state are, where the utilities are at that point in time, and adjust that target upward or downward.”

‘Recovered methane’

Colorado has set a statewide goal of achieving net-zero greenhouse gas emissions across all economic sectors by 2050, roughly in line with recommendations from scientists to avoid the worst impacts of global warming.

Another major point of contention in the PUC’s clean heat deliberations is the question of “recovered methane” — natural gas that’s captured by landfills, wastewater treatment plants, livestock operations or other sources and traded through a credit system.

Capturing gas from these sources — sometimes called “renewable” natural gas — is better for the climate than allowing the methane to escape into the atmosphere, but it still releases carbon dioxide and other pollutants when it’s combusted. Climate advocacy groups have sought to limit the application of recovered methane credits in clean heat plans, and state law capped their use at 5 percent of utilities’ required emissions reductions for 2030.

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“Recovered methane is not going to help. We need to electrify,” Renée Millard Chacon, an environmental activist and Commerce City Council member, told the PUC. “We especially need to electrify in communities like mine, where they need to transition first, because we are the most vulnerable.”

But Xcel has asked the PUC to “avoid limiting recovered methane going forward,” and the Polis administration has backed that request, recommending that no cap be set for the 2035 target. That has raised concerns among climate advocates that emissions cuts could be “double counted,” without resulting in real reductions in the gas utility sector.

“If you allow larger amounts of recovered methane to count, then you need to simultaneously increase the stringency for emission reductions from retail gas sales,” said Stacy Tellinghuisen, deputy director of policy development for Boulder-based Western Resource Advocates. “Because otherwise you’re just enabling emission reductions in other sectors, without at the same time driving down emissions from from gas utilities.”

Jack Ihle, Xcel’s regional vice president for regulatory policy, touted the company’s success in reducing greenhouse gas emissions in electricity generation, while describing natural gas distribution as “one of the harder-to-decarbonize sectors.”

“It’s hard for us to fathom something that contemplates 600,000 electrification adoptions by 2035, when we have 6,000 or so right now, using a lot of best efforts, in our view,” Ihle said.

“We’re not trying to shirk that obligation,” he added. “I think everyone here is excited to do emissions reductions when we can do them reliably, affordably and achievably.”

State law requires the PUC to enact rules that set a 2035 clean heat target by Dec. 1 of this year. Commissioners said Thursday that they will continue to accept public comments while they consider adopting a rule.