A bill that would provide incentives for Colorado’s regulated power utilities to replace or repower coal generation plants with natural gas facilities moved closer to enactment last Wednesday after the state Senate approved the House-sponsored legislation.

HB 1365 was approved by the state Senate in a required third reading and was sent back to the House for final approval. If the General Assembly approves the bill as expected, Gov. Bill Ritter plans to sign it into law.

Ritter unveiled the innovative plan in early March with Xcel Energy, the state’s largest regulated utility, and a coalition of industry and environmental groups when he proposed the Colorado Clean Air-Clean Jobs Act (see NGI, March 15). The legislation came after state officials pondered anticipated new clean air directives from the U.S. Environmental Protection Agency (EPA) that would require the state to ease pollution in the Front Range region, which includes Denver.

Retiring coal plants “will keep Colorado at the forefront of America’s energy revolution,” said Ritter. “It will protect consumers, clean our air and protect public health, and create new jobs by increasing demand for Colorado-produced natural gas.”

Under the bill, regulated utilities would receive incentives to reduce air emissions and require plans to achieve reductions giving “primary consideration” to replacing or repowering coal generation with natural gas. The legislation also allows utilities to consider “other low-emitting resources.”

Under the bill’s mandates, all regulated utilities with coal-fired power plants would be required to submit plans to the Colorado Public Utilities Commission by Aug. 15 on an emissions-reduction plan that covers 900 MW, or 50% of the utility’s generating capacity, whichever is less.

It gives Xcel incentives to convert its coal-fired plants to natural gas by allowing the company to factor into its rates the cost of the conversion after 2011 but before the new plants are operational.

State Sen. Bruce Whitehead, a Democrat, co-sponsored the Senate version with Sen. Minority Leader Josh Penry, a Republican. Whitehead said the legislation “is not about coal against natural gas…It’s about the future of our children. It’s about clean air…It’s about jobs.”

The bill passed on the final reading 20-13 with support from both sides of the aisle. It was sent back to the House with minor amendments; the bill first sailed through the House on March 22 on a vote of 53-12.

Colorado’s legislation led to a difficult choice for some Republican members, who are pro-energy, whether it be coal or the gas industry. Some members said the legislation would send the coal industry packing.

The legislation will “shoot the coal industry in the head,” said GOP Sen. Al White. Two Xcel plants switching to natural gas could cost 125 mining jobs in his region, he said.

But Penry took on GOP members in a rare defection to side with Democrats. If Xcel signs long-term contracts with gas companies, drilling in Colorado could rise by 15%, he said. Penry also tried to convince GOP members by telling them that it would be better to vote for the bill than to let EPA dictate how Colorado should set air standards.

A big reason to vote for the bill, said Penry, is because of the amount of gas in the state. “We have a heck of a lot here in Colorado,” he said. Gas industry executives who testified at a hearing in March said the bill could create an estimated 400 new jobs.

“It will drive more drilling in the state of Colorado,” said Penry.

CPUC Chairman Ron Binz applauded the legislation. “This is clearly a smart way to do it. I don’t think any other state has taken this comprehensive approach.”

The Center for American Progress (CAP), a progressive think tank headed by John D. Podesta and based in Washington, DC, said the bill’s enactment would lead to a 30% reduction in Xcel’s Colorado coal fleet “and a cut of as much as five million tons a year in carbon pollution. And this is all without federal legislation requiring cuts in emissions.”

The advances in Colorado “are being made possible by technological advances in developing shale gas fields, which mean that the domestic supplies of the natural gas that can power electric plants with half the CO2 [carbon dioxide] emissions of coal are 39% larger than previously thought,” the CAP stated.

“A shrinking limit on carbon pollution that establishes a price on these emissions should propel the electric power industry to retire aging coal plants and utilize spare capacity in building natural gas plants,” said CAP. “Gas[-fired] electricity will mesh well with rising levels of clean electricity from wind and solar power since gas plants are easier to power up when the wind doesn’t blow or the sun doesn’t shine.”

Colorado is not the only western state pursuing a new energy future. In March the developers of a planned 750 MW coal plant in Nevada announced they would shift to a 700 MW gas-fired plant combined with a 50-100 MW solar photovoltaic plant. Environmental concerns were the main driver behind the switch, said company officials.

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