Colorado PUC Strengthens Black Hills Clean Heat Plan, Requires Beneficial Electrification Offerings for Customers

Denver, CO —

Yesterday, the Colorado Public Utilities Commission (PUC) approved a portfolio of Clean Heat Plan programs to help Black Hills Colorado Gas customers heat their homes more efficiently, comfortably, and affordably while reducing greenhouse gas emissions. The decision ensures that customers of Black Hills, one of the state’s largest gas-only utilities, will now have access to the same opportunities to electrify their homes as customers of dual-fuel utilities — expanding customer choice and opening an important and cost-effective pathway to reduce emissions from the gas system.

The PUC initially issued a decision on the Clean Heat Plan in January 2025, but reopened the case after Black Hills requested rehearing based on its objection to the PUC’s inclusion of significant electrification programs. Yesterday’s decision, which follows the rehearing held in October 2025, reaffirms that beneficial electrification is one of the most cost-effective ways utilities can achieve the emissions reductions required by state law. Black Hills must now offer its residential customers incentives for beneficial electrification, including efficient electric heat pumps, as well as energy efficiency programs focused on weatherization and other home envelope improvements. The newly approved plan includes a budget of approximately $8 million for 2026 and 2027 for the programs.

The PUC also approved funding to study the feasibility of a thermal energy network pilot project. In a change from its initial 2025 decision, the PUC denied funding for both recovered methane (also called renewable natural gas) and advanced monitoring and leak detection. It found those strategies were not cost-effective and that existing regulations already require the advanced monitoring and leak detection protocols Black Hills proposed.

The PUC based its order for Black Hills to offer beneficial electrification incentives to customers on analyses developed by the Southwest Energy Efficiency Project (SWEEP) and Rewiring America. The PUC agreed with these organizations that Black Hills significantly overstated the expected costs of electrification. The PUC relied on Rewiring America’s analysis showing that virtually all Black Hills customers will save money when upgrading from a gas furnace to a clean and efficient heat pump, which provides both heating and cooling. This transition, when combined with weatherizing homes, represents a significant financial benefit for consumers while supporting Colorado’s climate goals. The PUC also highlighted other significant benefits of home heating electrification, including improved indoor air quality, public health benefits, and enhanced grid efficiency.

“While the rehearing delayed implementation of electrification and efficiency programs for Black Hills customers, we are glad that the PUC reaffirmed many of its initial decision points,” said Ramón Alatorre, Utility Program Senior Manager at SWEEP. “We continue to know that energy efficiency and beneficial electrification are the most effective, lowest-cost options to reduce gas system emissions as required to meet our state climate targets. We are thrilled that the PUC is once again taking this critical step to require a gas-only utility to make these resources available to their customers while rejecting more costly solutions.”

Black Hills is the second-largest gas utility in Colorado, with customers throughout the state. Most of its customers are in Castle Rock, Monument, Montrose, Frederick, Firestone, and the Roaring Fork Valley. With this decision, the Commission again found that beneficial electrification is the lowest-cost option available to a gas utility to reduce greenhouse gas emissions, setting a key precedent and signaling a significant shift in strategy for gas utilities toward cleaner, more affordable energy solutions.

“The PUC has sent a clear message that Colorado’s gas-only utilities cannot opt out of electrification, which is a crucial and cost-effective strategy for meeting our clean heat targets,” said Leslie Coleman, senior attorney at Earthjustice, who represents SWEEP in this case. “This decision will benefit Black Hills customers who want to save money on their energy bills by improving their home’s energy efficiency or installing clean energy technologies such as heat pumps.”

“This decision underscores that electrification is one of the most effective and cost-efficient tools available to reduce emissions from the gas system,” said Alex Lopez, senior regulatory policy manager at Rewiring America. “By directing Black Hills to invest in beneficial electrification, the Commission ensures that households served by gas-only utilities can access efficient electric heating that lowers energy costs, improves home comfort and indoor air quality and home comfort, and reduces climate pollution. The decision not only establishes important precedent for Colorado — it offers a model for regulators across the country grappling with how to decarbonize the gas system and lower costs for customers.”

The Colorado legislature created the Clean Heat Plan framework in 2021 with SB21-264, which sets enforceable climate pollution reduction targets for gas utilities. The Commission has already reached decisions on the first Clean Heat Plans for Xcel Energy and Atmos Energy, and has initiated review of Xcel Energy’s second Clean Heat Plan. Investor-owned gas utilities are required to file updated Clean Heat Plans every four years, laying out their strategies to meet decreasing emission targets.