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Executive Summary

In its 2004 session, the Colorado General Assembly is considering legislation (HB 1273) to require Colorado’s investor-owned electric utilities to acquire a specified minimum amount of electric power from renewable energy sources.

The purpose of this report is to estimate the impact that such a legislative mandate will have on the price of electricity sold by Colorado’s investor-owned utilities. The report will also consider other economic impacts of a “renewable portfolio standard” (RPS) for Colorado. Specifically, this report addresses the following questions:

• What effect will HB 1273 have on the electric rates paid by Colorado consumers?

• What factors affect the cost of renewable and non-renewable energy sources in Colorado?

• How sensitive are the conclusions about rate impact to changes in federal tax policy and future natural gas prices?

• What fraction of the Colorado retail market will be served by the renewable resources required under HB 1273?

• What other effects will an RPS have in Colorado?

• How does the proposed Colorado RPS compare to similar laws in other states?

The cost of electricity from renewable resources has fallen in recent years. Electric power generated by wind turbines in large “wind farms,” for example, is now price competitive with power produced using traditional fuels. But renewable and nonrenewable energy sources differ in many important respects, including their reliability, environmental impacts and their potential to affect rural economic development.

This report examines the distinctions between renewable and fossil fuel electric production and estimates the rate impact of requiring utilities to use a specified level of renewable resources. It is hoped that this report will provide legislators and other policy makers with a useful analytical tool to assist them in considering the Renewable Portfolio Standard in HB 1273.