On April 19, 2010, Colorado Governor Bill Ritter signed the Clean Air-Clean Jobs Act (“HB 1365”) into state law to reduce emissions from coal-fired power plants by 80% in the state.

Under the federal Clean Air Act, Colorado must submit a regional haze plan by early 2011, or the Environmental Protection Agency will write a plan for the state.  HB 1365 will allow utilities in Colorado to develop their own plans for meeting the regional haze guidelines, as well as the standards for ozone, mercury, and carbon dioxide.  The law also requires investor-owned electric utilities in the state to cut nitrous oxide emissions from coal-fired plants by up to 80% by the end of 2017.

Critics opposed the bill, arguing that it would take away jobs from coal miners and unfairly favor natural gas producers.  However, the bill passed with support from Xcel Energy Inc.’s Chairman and CEO, who stated that the new law would allow the state to comply with the Clean Air Act’s regional clean air standards requirement in a more cost effective manner.  Supporters also said the new law would create jobs by replacing older technology with cleaner energy sources.

Xcel Energy has agreed to work with the Colorado Department of Public Health and Environment to submit an Emission Reduction Plan by August 15, 2010 to the Colorado Public Utilities Commission (“Colorado PUC”) that will specify how the company will retire or retrofit at least 900 MW of coal-fired generation.  The plan will focus on converting or replacing those coal plants with natural gas, renewables, and other cleaner fuel supplies.

The law also allows utilities to fully recover the cost of expenses incurred executing an approved Emission Reduction Plan, including the costs for planning, developing, constructing, operating, and maintaining any emission control or replacement generation facilities.  If a utility is subject to rate regulation by the Commission and sells power on the wholesale market, the Colorado PUC can assign some of the plan’s costs to wholesale customers, as long as there is no conflict with existing wholesale contracts.  The utility must then apply to FERC for recovery of such costs from its wholesale customers.  If FERC does not allow recovery of costs assigned to wholesale customers, then the Colorado PUC will reassign those costs to be recovered through retail rates.

Governor Ritter said he hopes the new law will serve as guidance to the rest of the country for reducing air pollution.

The text of the legislation is available here.