This summer, Governor Polis signed into law the Modernize Energy Distribution Systems Act ("SB 218") to optimize the electric grid, support the electrification of Colorado's transportation and infrastructure, and facilitate renewable energy development. The comprehensive legislation aims to improve the state's energy distribution system and ensure Colorado's utilities are prepared for the clean energy transition. Below is an outline of SB 218's main goals and requirements:
Distribution System Upgrades.
A Qualifying Retail Utility, which includes any investor-owned electric utility that services 500,000 customers or more in Colorado (such as Xcel Energy), must upgrade its distribution systems to affordably and reliably meet both the state's and the federal government's electrification and decarbonization goals. SB 218 requires Qualifying Retail Utilities to (1) commence a data collection process to inform future energization timelines, (2) adopt cost caps for customers, (3) propose alternatives to major infrastructure upgrades (if an upgrade is required to interconnect or energize a distributed energy resource), such as the use of a flexible interconnection, and (4) establish a streamlined procedure for customers with a hybrid facility to complete the interconnection.
Although Qualifying Retail Utilities were already required to file a distribution system plan with the Public Utilities Commission (the "Commission"), the plans must now incorporate sufficient hosting capacity for the implementation of the state and federal decarbonization targets. The plans must also include sufficient hosting capacity to effectively implement state, local, and government agency plans related to housing, economic development, transportation, and building electrification and the Qualifying Retail Utility's approved renewable energy plan, clean heat plan, beneficial electrification plan, demand-side management plan, gas infrastructure, and transportation electrification plan.
Further, a Qualifying Retail Utility is required to consult with and prioritize investments in income-qualified or disproportionately impacted communities with residential capacity constraints.
Renewable Energy Development.
SB 218 endeavors to benefit renewable energy development and provide for increased battery storage on the grid by tying a Qualifying Retail Utility's distribution system plan to cost recovery, which encourages long-term infrastructure improvements. A Qualifying Retail Utility must propose distribution activities and budgets that will strategically benefit or advance Colorado's energy policy goals. If the Commission finds that the projected costs advance decarbonization or similar policy goals, the Qualifying Retail Utility may recover the costs of development through its grid modernization adjustment clause. Distribution activities may include (a) capital investments in equipment upgrades, repair and replacement programs, conductor replacements and installations, pole repair and replacement, overhead rebuilds, (b) operation and maintenance of the same, and (c) investments in or operations with similar technology or actions that enhance the distribution system to meet federal, state, and regional air quality and decarbonization targets.
Apprenticeship Program.
Additionally, SB 218 aims to create jobs by establishing a grant program for lineworker apprenticeships. This program will provide training for transmission or distribution lineworkers and provide funding for the required educational materials and program instructors. Qualifying Retail Utilities are required to ensure they are sufficiently staffed to complete the modernization efforts set forth in SB 218, creating immediate job opportunities for graduates of this apprenticeship program.
Virtual Power Plant Program.
SB 218 also establishes the virtual power plant program, with the intent of enabling ratepayers (such as Xcel Energy customers) to save money by taking advantage of distributed energy resources, such as solar and battery storage systems, micro energy grids, smart thermostats, and electronic vehicles. By February 1, 2025, Qualifying Retail Utilities are required to file an application for a virtual power plant program with the Commission. The program must provide performance-based compensation for the use of the distributed energy resources, including peak demand reduction, voltage support services, and participation in non-wire alternatives (energy storage, conservation measures, and grid software controls). Overall, SB 218 aligns the state's infrastructure with Colorado's clean energy goals. It aims to provide the necessary support and upgrades to Colorado's electrical distribution system and significantly expand opportunities for renewable energy development.
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