The Colorado General Assembly passed a law ([http://www.leg.state.co.us/CLICS/CLICS2007A/csl.nsf/fsbillcont3/5EA2048E... HB 1037])in 2007 requiring the investor-owned electric and natural gas utilities to adopt demand-side management (DSM) programs that provide financial incentives for their customers to purchase more efficient equipment and processes, and to engage in demand response. The law provided minimum energy and demand savings targets but also authorized the Colorado Public Utilities Commission (PUC) to revise the goals and establish interim savings targets as it deems appropriate. On the gas side, the law required to the Commission to undertake a rule making proceeding. The PUC has carried out several procedures to establish electric DSM goals and develop cost recovery mechanisms for the two electric investor-owned utilities (IOUs). The PUC reviews programs annually through filings made by each utility as required by the law.
'''Electricity Savings Goals'''
HB 1037 required the PUC to adopt electricity savings goals for the state's two investor-owned utilities of at least 5% of the utility's 2006 peak demand and electricity sales by 2018. The PUC set a target for efficiency to account for half of the expected increase in demand every year, which meets the goals established by the General Assembly. While the statutory goals end in 2018, the PUC extended electricity sales reduction goals through 2020.
After establishing the initial goals for both Xcel Energy and Black Hills Energy, the PUC has revisited the goals while reviewing the utilities' DSM plans. The new goals established for Xcel in March 2011 are higher than the original goals, beginning with a 1.14% reduction in 2012, and increasing to 1.68% in 2020. The goals established for Black Hills Energy in 2012 are similarly larger than the original goals, and designed to achieve the statutory goal of a 5% reduction of 2006 electricity sales by 2018.
'''Natural Gas Savings Goals'''
HB 1037 required the Commission to undertake a rule-making proceeding that would (i) develop expenditure and savings targets, (ii) determine cost recovery, and (iii) create a financial bonus structure. The law also established minimum investment levels for gas utility DSM programs. According the law, gas utilities annually must spend at least 0.5% of their revenue from the previous year. The law prevents the PUC from assigning financial penalties to Gas utilities that fail to meet their energy savings targets, but requires utilities to submit annual reports to the PUC. The reports must highlight their program spending, energy savings, and the cost effectiveness of their programs from the previous year.