Colorado’s Grid Modernization Legislation

In May, 2024, Colorado passed grid modernization legislation that will require utilities serving 500,000 customers or more (that is, Xcel Energy) to upgrade their distribution systems to support the state’s beneficial and transportation electrification and decarbonization goals, as well as other federal, state, regional, and local air quality and decarbonization targets, standards, plans, and regulations. In connection with these goals, utilities must commence a data collection process, adopt certain cost caps, and propose to the public utilities commission the use of an optional flexible interconnection or energization tariffs.

To support distributed resources, the utility is required to create and file with the commission an application to implement a virtual power plant program, including a tariff for performance-based compensation for a qualified virtual power plant.

From an equity perspective, the utility is required to identify interconnection and load hosting capacity for distributed energy resources for disproportionately impacted communities within its service territory, and consult with these communities.

The legislation creates a grid modernization adjustment clause to pay for decarbonization-related investments, as well as some investments that meet performance-based criteria.