But utilities in Colorado “have a lot more flexibility in terms of the portfolio that they propose,” said Joe Dammel, manager of carbon-free buildings at RMI. While Xcel can prioritize energy efficiency and electrification in Colorado, Minnesota’s Natural Gas Innovation Act requires gas utilities to produce emissions-reduction plans that spend at least half of their budgets on alternative fuels like renewable natural gas, which can still heavily pollute. In Colorado, a much smaller amount is dedicated to alternative fuels; only around $10 million out of the $440 million can be spent on renewable natural gas and recovered methane, and all projects must specifically be approved by the commission.
Another difference between the two recently approved plans is that Xcel delivers gas and electricity to about 1.5 million customers in Colorado, which gives it an opportunity to counterbalance lost gas revenue with increased sales from its electricity business.
Meanwhile, CenterPoint serves gas to about 910,000 customers but has no electricity customers. That gives it fewer opportunities to make up for losses from its gas business driven by electrification mandates, and more incentive to prioritize the use of alternative fuels delivered through the pipelines it owns — and not electrification.
Investing in 100,000 heat pumps
Now that the funds have been approved, Xcel is waiting on a final written order from regulators, which should arrive later this month. From there, it will start implementing the plan and work on defining rebate levels and informing customers on how to access incentives.
The details are still being decided, but customers will likely need to pay first and then get reimbursed later, as is the case for many current rebate programs, said Emmett Romine, vice president of energy and transportation solutions at Xcel. Customers would also get higher rebates if they choose more advanced technologies, like high-efficiency cold-climate heat pumps.
Beyond educating customers, the company is putting workforce-training plans together to ensure there are enough heat-pump installers ready to help customers convert. Xcel is also working with distributors and manufacturers “to make sure that there’s a supply chain that will come to Colorado when we stimulate demand,” Romine said.
The plan represents a significant step up from Xcel’s current pace of upgrades. “The goals are really aggressive,” Romine said. “When you look at the number of heat pumps and the number of water heaters we’ve got to contemplate getting into homes, it’s an enormous amount of work.” Currently, Xcel does around 10,000 rebates a year for traditional gas furnaces. Now, it’s aiming to do 20,000 heat-pump conversions this year and just under 100,000 total by the end of 2026, Romine said.
That supercharged effort won’t come without costs. Ratepayers will see electricity rates go up by 1.1 percent and gas rates rise by 7 percent over the next four years due to the plan. But advocates say it’s worth it to avoid pouring money into a gas system that must be phased out — and that the climate benefits outweigh the upfront costs. Even without the Clean Heat Plan, Xcel projected it would need to increase base rate revenue by 32 percent between 2023 and 2030, The Colorado Sun reported.
Colorado’s plan “is a very good example of needing to pursue both sides of the equation at the same time — decarbonization, electrification — but at the same time ensuring that we’re starting to shrink and eliminate unnecessary investments in the gas system,” said Alejandra Mejia Cunningham, senior manager of state buildings policy at the Natural Resources Defense Council.
The Public Utilities Commission has encouraged Xcel to report its progress by 2026, ahead of the legally mandated schedule, Ihle said. Advocates will be watching closely to see how it all plays out.
“We’re gonna have to make sure that we’re seeing the results of that in terms of participation, customer satisfaction, and ultimately emissions and cost reductions,” Dammel said. “There’s going to be a lot of utilities across the country following this.”
