Further, an unadvertised “stakeholder” group only allowed entities not supporting rapid decarbonization by the electricial sector or anything that could impinge on Xcel profits, even a mere study bill of Community Choice Energy
Clean Energy Plan Guidance – Draft Release for Public Comment
Colorado Department of Public Health and Environment – Air Pollution Control Division, September 25, 2020
Introduction
During the 2019 legislative session, Colorado adopted Senate Bill 19-236 which is contained in 40-2-125.5 C.R.S. This legislation directed Qualifying Retail Utilities (QRU) to submit a Clean Energy Plan (CEP) as part of their next Electric Resource Plan (ERP) filing with the Colorado Public Utilities Commission (PUC). The legislation also allows for voluntary CEP filings by electric cooperatives, municipals, and small investor owned utilities that do not meet the customer size threshold of a QRU. As part of the CEP process, the Air Pollution Control Division (APCD) is required to participate in the PUC proceeding and provide a verification of the CO2 emissions reductions projected by the CEP in calendar year 2030, when compared to the 2005 baseline.
Also during the 2019 legislative session, Colorado adopted House Bill 19-1261 which is contained in section 25-7-105 C.R.S. In addition to setting economy-wide Greenhouse Gas (GHG) emissions reduction targets for Colorado, this legislation created a mechanism by which utilities with an approved CEP can attain regulatory certainty with the Air Quality Control Commission (AQCC) through 2030, commonly referred to as the safe harbor provision. Because the output from the PUC process becomes the verification point for the safe harbor determination, these two pieces of legislation must be considered together during any emissions reduction verification process.
In developing the information contained within this guidance document and emissions verification workbook, APCD engaged with a broad set of interested groups including environmental advocacy, municipal government, public policy, and utilities through a technical work group process (but only entities supportive of Xcel). This guidance document outlines APCD’s plan, after considering the input of the workgroup participants, for conducting the required verification from a neutral perspective using a thorough and transparent process. The following sections of this document outline specific elements of the participation and verification process for CEPs.
Consultation with AQCC
40-2-125.5(4)(VIII) C.R.S. requires that the APCD consult with the AQCC prior to participating in the CEP proceedings at the PUC and submitting the emissions verification reports, although the requirements for the consultation are not described in the statute. To the demonstrate the consultation requirement, the APCD has developed this guidance document and verification workbook through a collaborative process, is holding a public comment period on the draft documents, and will brief the AQCC and consider its feedback and input prior to publishing the final documents and implementing the process for a CEP filing.
It is important for the AQCC consultation activity related to the emissions verification process to occur proactively. This is necessary to avoid any possible delays in the PUC proceedings that may be caused if consultation did not occur until after a CEP has been filed. Publication of the final guidance and verification form prior to CEP submissions is also necessary so that the utilities understand the process by which their plan(s) will be evaluated while they are preparing them.
The APCD recognizes that the AQCC may ask to receive additional update briefings while the CEP process is ongoing related to the emissions verification reports in order to better understand the scope of emissions reductions anticipated from the portfolios being considered. The APCD can provide this type of ongoing update to the AQCC, but does not believe these briefings must occur prior to filing the verification reports to the PUC due to the design of a neutral, transparent verification process that relies on publically available data and a published verification workbook. Providing updates in this way will allow the PUC process to proceed without delays that may be caused due to scheduling agenda items with the AQCC.
Participation in Clean Energy Plan proceedings
40-2-125.5(4)(VIII) C.R.S. requires the APCD to participate in the CEP proceedings held by the PUC. APCD intends to file a motion at the onset of a CEP proceeding to request participation status and define the submission requirements of the verification reports to the PUC early in both the Phase I and Phase II portions of the proceeding. It is important for the APCD verification to be submitted early in each phase so that the process can move forward efficiently, the PUC and their staff have access to the information while evaluating the plans, and this new requirement can fit as seamlessly as possible into the existing PUC processes.
Appendix A includes milestones in the PUC process where APCD may become involved. Participation at different milestones is dependent on the status that is requested and granted for each individual CEP proceeding.
Verification Methodology
40-2-125.5(4)(VIII) C.R.S. requires the APCD to describe the methods that will be used to verify the emissions reductions projected by a CEP. Publication of the workbook that will be used for the verification process fulfills this requirement and creates transparency in the process. The verification workbook will be embedded as part of this guidance document in Appendix B when the final version are published. For draft purposes and the public comment period, it is posted separately.
The workbook will be used by utilities while preparing their CEP filings and included in the information submitted with the filing to the PUC. The APCD will then review the submitted information and sources of the data to produce a verification report for general portfolios in Phase I, detailed portfolios in Phase II. Additionally, the APCD will verify the final plan approved by the PUC at the end of the proceeding to determine if the safe harbor provisions have been achieved.
Any cooperative or municipal utility filing a voluntary plan will also use the same workbook for calculating emissions reductions and the APCD will verify those calculations. For these plans, a single verification would be performed prior to the submission of the plan to the PUC rather than during a PUC proceeding.
EMISSIONS VERIFICATION WORKBOOK
The following items describes the content of the emissions verification workbook. The workbook has been designed to provide emissions reduction calculations for both CEP requirements and safe harbor determinations in a neutral and transparent way. Sheets in the workbook include:
Instructions: This sheet describes the content of each of the sheets and the data input requirements. There is no data entry on this sheet.
CEP Demonstration: This sheet calculates the percent reduction in CO2 emissions from 2005 levels based on Colorado electric sales. All values are linked to other sheets and there is no data entry.
Safe Harbor Evaluation: This sheet calculates the percent reduction in GHG emissions from 2005 levels based on Colorado retail electric sales. All values are linked to other sheets and there is no data entry.
2005 All Electricity: This sheet is used to enter all data associated with the 2005 baseline operations and sales. The sheet includes pre-populated equations for calculating and aggregating emissions. The utility will use previously collected, and publically reported if available, information to populate all generation assets that provided electricity into their system. These assets include owned generation sources, contracted generation sources, as well as electricity market transactions. Also included in this sheet are retail sales information, Colorado wholesale contract sales information, and information for Colorado transmission and distribution systems, including SF6 releases.
2030 All Electricity: This sheet is used to enter all data associated with the 2030 projected operations and sales. The sheet includes pre-populated equations for calculating and aggregating emissions. The utility will use information from the resource plan modeling conducted to develop the CEP to populate all generation assets that are proposed to provide electricity into their system. These assets include owned generation sources, contracted generation sources, as well as electricity market transactions. Also included in this sheet are projected retail sales information, projected Colorado wholesale contract sales information, and projected information for Colorado transmission and distribution systems, including SF6 releases.
Interim Year Summary: This sheet is an informational tab intended to help facilitate statewide planning for GHG reduction programs. It provides estimations of annual load, beneficial electrification load, CO2 emissions, and GHG emissions based on the modeling conducted for the CEP filing.
Lists and Lookups: This sheet includes picklists, emissions factors, and conversion constants linked to the equations in the 2005 All Electricity and 2030 All Electricity sheets.
Throughout the development of this guidance document and verification workbook, a number of topics were raised by the workgroup participants seeking clarification on how specific data or scenarios would be handled in the verification. The following sections describe how the APCD intends to address each of these items in the verification process.
RESOLUTION OF RETAIL AND WHOLESALE DOUBLE COUNTING
In Colorado there are multiple instances where one utility supplies electricity through a wholesale contract to another utility who then sells it to their retail customers. When both members of this type of contract intend to file a CEP, this creates a duplication of emissions in the corresponding evaluations. In response to this issue, one of the environmental organizations and one of the utility participants developed a joint proposal that was brought forward in the workgroup describing how the overlap could be resolved. The proposal removes from the wholesale utility baseline all emissions associated with contracts that no longer existed as of January 1, 2019, which is consistent with the statute. Further, the proposal also removes from the wholesale utility baseline all emissions associated with current contracts for which the retail utility has given the wholesale utility notice that they intend to file their own CEP. The APCD agrees with these two methods for resolving potential overlap situations and has included them in the instruction sheet of the draft verification workbook.
The joint proposal also requested AQCC approval of a comprehensive safe harbor, that is, one that applies to emissions from generation that serves both retail and wholesale sales as part of the AQCC review and input on this APCD guidance document. APCD agrees that all generation emissions associated with electricity sales, whether sold to retail or wholesale customers, should be evaluated equally and be given the same consideration when determining source applicability in any future AQCC rulemaking process. APCD will finalize the comprehensive safe harbor approach through the technical work group and bring it forward in a timely way to the AQCC for consideration and decision. APCD strongly believes this needs to be considered and finalized in the near-term, in addition to the publication of this guidance document outlining the verification process, to provide certainty regarding baseline adjustments and comprehensive safe harbor before any utility files a Clean Energy Plan, the first of which is anticipated in the first quarter of 2021.
For reference, the proposal to the technical work group is included in Appendix C.
DEFINITION OF AS FILED
Both statutes contain the language “as filed” for determining whether or not a CEP has met applicable emissions reduction thresholds, however neither define this term. APCD intends to evaluate as filed to be the detailed portfolios provided in Phase II of the PUC proceeding because these represent actual generation portfolios being considered for approval. As described above, verifications are also being performed on the generic portfolios as part of Phase I so this process can remain intact if either commission decides to define as filed in their rules. For voluntary filings by a cooperative or municipal utility, there is a single filing to the PUC.
MARKET TRANSACTIONS
To be consistent with existing data collection and reporting practices, market transactions are reported based on the annual net aggregation in each applicable market. In the event that a utility is a net seller in a market, the energy value reported is negative and if a utility is net buyer, the value reported is positive. It is important to understand that with market transactions, the counter party is unknown and therefore the source of the energy or the final delivery location are also unknown to the Colorado utility making the transaction. Because the buyers in these markets use a market intensity rate to determine GHG emissions, no gap is created in the emissions accounting. If a Colorado utility sells into a market and that electricity is ultimately purchased by another Colorado utility, double counting is avoided because only the buyer has reported emissions associated with that electricity transaction.
MARKET EMISSIONS INTENSITY RATES
2005 Baseline: APCD intends to use the Emissions & Generation Resource Integrated Database (eGRID) Total Output Emission Rates published by EPA for the baseline emissions calculations and have included them for regions and sub-regions of the western United States in the lists and lookups sheet in the verification workbook. These emission rates represent the annual system-wide emissions from all generation sources that supplied electricity to the region or sub-region. APCD believes this is the most representative rate of energy that was available for market transactions in 2005 because sales into the markets are made from each utility’s system, not individual generation assets.
2030 Projections: To estimate the market emissions intensity rates for 2030, APCD used the historical eGRID Total Output Emission Rates from 2005 through 2018 and created a trend extending through 2050. The trend assumes the western grid achieves 80% GHG reduction by 2040 and 90% GHG reductions by 2050, both from 2005 levels. APCD believes this creates a realistic, yet conservative approach to estimating future emissions. The approach is realistic because of the continued downward trend in actual utility emissions and conservative because it is anticipated that much of the energy available for real time market purchases in 2030 will be from renewable resources that would have otherwise been curtailed in the absence of energy imbalance markets or other types of organized markets.
RENEWABLE ENERGY CERTIFICATES (REC)
2005 All Electricity: For this sheet, information about REC creation, retirement, and sales are not included in the data entry or calculations. Electricity that was reported by the utility as zero GHG in 2005, even if the RECs were unbundled and eventually sold separately or retired in a later year, should be treated in the same manner as part of this evaluation. Assigning an emissions intensity to that energy now would incorrectly increase the baseline emissions levels above what the utility has previously reported.
2030 All Electricity: For this sheet, information about REC creation, retirement, and sales are not included in the data entry or calculations. 40-2-125.5(3)(III) C.R.S. requires that all RECs used for compliance with a CEP be retired in the year in which they are created. Therefore, in the 2030 compliance year that is being verified by the APCD through this process, any REC that is created through owned generation or acquired through supply contracts or market purchases must be retired by the utility. This retirement provision allows the utility to project zero GHG in emissions calculations for these sources. The form also allows for custom emissions intensity values to be used in the case of contract purchases that contain a mix of zero GHG and GHG emitting resources and market intensity rates are used when energy purchased through markets cannot be verified to include the associated RECs.
ATTRIBUTION FOR BENEFICIAL ELECTRIFICATION PROGRAMS
The State of Colorado views beneficial electrification of transportation, buildings, and industry as an important and powerful tool for maintaining progress toward achieving the GHG reduction goals defined in statute. As such, electric utilities are encouraged to develop bold and transformative programs to facilitate electrification of transportation, residential and commercial buildings, and industrial applications to support the statewide GHG reductions. In addition to reducing GHG emissions, beneficial electrification programs often include co-benefits such as improved indoor air quality, reduced criteria pollutant emissions, and energy cost savings. The benefits of early electrification efforts will continue to expand over time as the overall electric grid decarbonizes.
APCD anticipates that utilities will be able to submit a CEP that incorporates projected load growth from beneficial electrification programs and achieves a minimum of 75% GHG emissions reductions from 2005 levels, based on Colorado retail sales. Therefore, the APCD will not treat the GHG emissions that transfer onto the utility system from other sectors as a result of beneficial electrification programs differently during the CEP emissions reduction verification.
APCD recognizes that CEPs may be modified through the course of the proceedings before the PUC. This guidance sets forth a mechanism by which utilities may seek additional consideration of beneficial electrification from the AQCC through a declaratory order under 5 CCR 1001-1, Section VI. Such consideration may be appropriate in the event the PUC approves an initial CEP that does not achieve at least a 75% reduction in total GHG emissions from the 2005 baseline necessary to satisfy the requirements of 25-7-105(1)(e)(VIII)(C), C.R.S., inclusive of emissions associated with the additional projected load from beneficial electrification programs. The petition for a declaratory order would seek an AQCC determination on the appropriate attribution of emissions associated with beneficial electrification programs as part of the reduction calculation. The Division expects that any declaratory order petition be conditioned upon ongoing demonstration of satisfactory GHG emissions reductions.
In order for the Division to evaluate any petition for declaratory order associated with beneficial electrification and assess its position, the requesting utility must include the following information in addition to the requirements set forth in the AQCC Procedural Rules:
- Verification that the utility filed at least one (1) portfolio as part of Phase 2 of the CEP process that was projected to achieve a minimum of 80% GHG emissions reduction from 2005 levels based on Colorado retail sales.
- Detailed description of each transportation, building, or industrial electrification program or plan, that includes the following elements:
- Quantification of system-wide load growth required to serve the plan in 2025 and 2030,
- Projected CO2 and GHG emissions intensity of the system in 2025 and 2030,
- CO2 and GHG mass emissions in 2025 and 2030 associated with plan load growth,
- CO2 and GHG mass emissions reductions in 2025 and 2030 from residences, buildings, transportation, or industrial sources,
- Calculations, assumptions, and emission factors used to determine emissions reductions from residences, commercial buildings, transportation, or industrial sources,
- Metrics to be tracked annually to demonstrate program implementation and effectiveness,
- Other relevant data and issues pertaining beneficial electrification.
- Information demonstrating that the plan(s), individually or in aggregate, achieve a minimum economy-wide net GHG benefit of at least 1.5 times the amount of emissions transferred onto the utility system by the load serving the plan(s) in 2025.
- Information demonstrating that the plan(s), individually or in aggregate, achieve a minimum economy-wide net GHG benefit of at least 2.0 times the amount of emissions transferred onto the utility system by the load serving the plan(s) in 2030.
- Certification that the utility will submit to the Air Pollution Control Division an annual progress report for all beneficial electrification plan(s). A copy of any annual report required to be filed with the PUC is acceptable to meet this requirement if it contains all of the required elements. The progress report will include the following elements:
- Quantification of system-wide load required to serve the plan,
- Actual CO2 and GHG emissions intensity of the system,
- CO2 and GHG mass emissions associated with plan load,
- CO2 and GHG mass emissions reductions from residences, buildings, transportation, or industrial sources,
- Calculations, assumptions, and emission factors used to determine emissions reductions from residences, commercial buildings, transportation, or industrial sources, and
- Program metric results as defined in 2.f.
Failure to demonstrate ongoing compliance with the terms of a declaratory order, if granted, may result in rescission or any other consequences deemed appropriate by the AQCC.
The Division will maintain a list of those utilities that have demonstrated the requisite GHG emission reductions under section 25-7-105(1)(e)(VIII)(C), C.R.S. through a CEP or a CEP and AQCC declaratory order.
