40-3.3-103. Neighborhood-scale alternatives projects - cost recovery - reporting requirement. (1) A dual-fuel utility shall work with a gas planning pilot community to rank and prioritize neighborhood-scale alternatives projects within each gas planning pilot community based on local government input and consideration of:
(a) The number and customer class served by each pipeline segment included in a neighborhood-scale alternatives project;
(b) The degree of support for the neighborhood-scale alternatives project from customers potentially impacted by the project, with preference given to those projects that have full support from potentially impacted customers;
(c) The cost-effectiveness of the neighborhood-scale alternatives project, using the cost-benefit handbook from the dual-fuel utility's most recent gas infrastructure plan;
(d) The net cost to customers potentially participating in the neighborhood-scale alternatives project;
(e) The availability of alternative energy service, including for scenarios with enhanced gas and electric demand response or demand flexibility;
(f) The ability of thermal energy networks to serve the area covered by the neighborhood-scale alternatives project, with priority given to projects that include a thermal energy network or a geothermal energy project;
(g) Whether the neighborhood-scale alternatives project is part of a new development or would serve existing customers, or both;
(h) The prioritization of pipeline segments that are part of projects included in a dual-fuel utility's gas infrastructure plan or otherwise identified by the dual-fuel utility for inclusion in a future gas infrastructure plan, to the extent this information is available; and
(i) The location of any nearby disproportionately impacted community or pipeline segments that serve disproportionately impacted communities.
(2) (a) (I) Prior to June 1, 2026, a dual-fuel utility and local government shall jointly submit for approval at least one initial neighborhood-scale alternatives project, to be located within a gas planning pilot community, to the commission if the neighborhood-scale alternatives project has the full support of potentially affected customers. The filing must also contain a list of potential projects that are ranked highly but do not have full customer support at the time of the filing.
(II) Prior to June 1, 2027, a dual-fuel utility and a local government shall jointly submit for commission approval the neighborhood-scale alternatives projects included on the list in the filing submitted pursuant to subsection (2)(a)(I) of this section and that will be pursued in a gas planning pilot community, which projects may lack full customer support if the local government has determined that a reasonable majority of customers supports the project. The local government shall determine what constitutes a reasonable majority. The determination of a reasonable majority of customer support and efforts to obtain customer consent must be supported by a sworn affidavit or testimony from an official employee of the local government as part of the joint application to the commission. The joint application must also include the net costs of the projects, including any:
(A) State or federal funding or tax credits;
(B) Gas planning pilot community incentives or funding;
(C) Existing dual-fuel utility program funding;
(D) Additional dual-fuel utility incentives or funding;
(E) Customer contributions; and
(F) Anticipated total capital expenditures by the dual-fuel utility and customers, avoided utility capital expenditures, and future discounted customer utility bill savings or expenses.
g or tax credits;
(B) Gas planning pilot community incentives or funding;
(C) Existing dual-fuel utility program funding;
(D) Additional dual-fuel utility incentives or funding;
(E) Customer contributions; and
(F) Anticipated total capital expenditures by the dual-fuel utility and customers, avoided utility capital expenditures, and future discounted customer utility bill savings or expenses.
(III) If a dual-fuel utility will not pursue a neighborhood-scale alternatives project in one or more gas planning pilot communities, the dual-fuel utility and local government, prior to June 1, 2027, shall jointly file a report with the commission explaining why a neighborhood-scale alternatives project will not be pursued in that community.
(b) The commission shall provide an opportunity for public comment regarding the dual-fuel utility's submission pursuant to subsection (2)(a)(III) of this section.
(c) The commission shall approve a neighborhood-scale alternatives project application submitted by a dual-fuel utility if:
(I) The project is supported by a local government ordinance, proclamation, or resolution;
(II) The commission finds that the project is:
(A) Consistent with the state's greenhouse gas reduction goals; and
(B) In the public interest, considering costs and benefits to the gas planning pilot community, participating customers, and ratepayers within the dual-fuel utility's gas service territory and any cost shift between participating customers and all ratepayers of the dual-fuel utility, with preference given to projects that result in no cost shift to nonparticipating customers;
(III) The approved portfolio of neighborhood-scale alternatives projects provides an appropriate mix of technologies, customer classes, and new construction and existing buildings and includes the use of thermal energy networks or geothermal energy projects; and
(IV) The commission finds that alternative energy service is available to all customers within the project area and can reasonably be implemented within the project area. In making this finding, the commission shall consider:
(A) The cost of end uses powered by different fuels, impacts on income-qualified utility customers and customers living in disproportionately impacted communities, and the state's greenhouse gas emission reduction goals;
(B) Existing utility or other incentives to support customer adoption of the alternative energy service; and
(C) The degree of customer support for the project, considering the information provided pursuant to subsection (1)(b) of this section, and with priority given to projects that have the full support of potentially affected customers.
(3) (a) The commission shall allow a dual-fuel utility to currently recover the costs incurred during the development of a neighborhood-scale alternatives project, including costs to transition the distribution system, invest in electric infrastructure, and provide customer incentives. Such costs are fully recoverable regardless of the performance of the alternative energy service. The commission shall also permit cost recovery for personnel to work on the development, in whole or in part, of neighborhood-scale alternatives projects.
(b) The dual-fuel utility shall propose to the commission how costs will be recovered across the dual-fuel utility's electric and gas business.
s. Such costs are fully recoverable regardless of the performance of the alternative energy service. The commission shall also permit cost recovery for personnel to work on the development, in whole or in part, of neighborhood-scale alternatives projects.
(b) The dual-fuel utility shall propose to the commission how costs will be recovered across the dual-fuel utility's electric and gas business.
(c) For gas planning pilot communities that receive gas service from a dual-fuel utility but are not served by the electric utility that is part of the dual-fuel utility, the commission shall consider a cost-sharing agreement, as necessary to implement a neighborhood-scale alternatives project, which agreement the dual-fuel utility proposes to enter into with a local cooperative electric association or municipally owned electric utility to make the incumbent gas utility that is part of the dual-fuel utility and its customers whole for any projects approved by the commission when there is a cost shift. This subsection (3)(c) shall not be construed to subject a local cooperative electric association or municipally owned electric utility entering into such an agreement with a dual-fuel utility to the jurisdiction of the commission. Any federal, state, or local funding made available for a project shall be applied prior to application of utility programmatic funds, such as demand-side management, beneficial electrification, or other existing or future customer-sited programs, incentives, rebates, and financing.
(4) In approving a neighborhood-scale alternatives project in a gas planning pilot community, the commission may modify the gas utility's service requirement for select premises with an alternative energy service requirement. Notwithstanding any provision of law to the contrary, nothing in this section affects or abridges a dual-fuel utility's service requirements in areas outside the neighborhood-scale alternatives project area. The commission may impose an alternative energy service requirement for any certificate of public convenience and necessity granted to the gas utility to provide service to the targeted area that is the subject of the neighborhood-scale alternatives project if the commission finds that alternative energy service is available.
(5) (a) As part of a neighborhood-scale alternatives project, a dual-fuel utility may propose to fund conversion of existing gas appliances or equipment to nonemitting thermal resources, including offering incremental incentives or financing above that approved for clean heat plans, as defined in section 40-3.2-108; beneficial electrification plans, as defined in section 40-3.2-109; demand-side management programs, as defined in section 40-1-102; or other related filings.
(b) A dual-fuel utility may also propose to offer new rate structures to pay for thermal energy networks or other nonemitting thermal resources as an alternative energy service, under which rate structures customers pay the utility for thermal energy network services to offset the initial cost of new appliances or other equipment. If a dual-fuel utility proposes to offer such a rate, the commission shall not grant the dual-fuel utility current cost recovery pursuant to subsection (3)(a) of this section. A dual-fuel utility shall have the right of first refusal to offer thermal energy network service or alternative energy service as part of a neighborhood-scale alternatives project, if the dual-fuel utility sets forth its intention to exercise its right of first refusal and defines the scope of such exercise in the application to the commission and such right of first refusal:
(I) Is limited to neighborhood-scale alternatives projects in gas planning pilot communities; and
(II) Is exercised within two years after approval by the commission.
rhood-scale alternatives project, if the dual-fuel utility sets forth its intention to exercise its right of first refusal and defines the scope of such exercise in the application to the commission and such right of first refusal:
(I) Is limited to neighborhood-scale alternatives projects in gas planning pilot communities; and
(II) Is exercised within two years after approval by the commission.
(6) If a neighborhood-scale alternatives project qualifies as an energy sector public works project, as defined in section 24-92-303, a dual-fuel utility shall comply with all requirements set forth in part 3 of article 92 of title 24. The dual-fuel utility shall utilize utility employees or contractors that meet the apprenticeship utilization requirements set forth in section 24-92-115 to service and maintain any thermal energy or geothermal energy projects owned by the dual-fuel utility and approved by the commission under this section.
(7) By June 1 of each year following approval of a neighborhood-scale alternatives project, a dual-fuel utility shall submit a report to the commission on the implementation of the neighborhood-scale alternatives project. The report must include, at a minimum:
(a) An update on project implementation, including the degree of customer support for the project;
(b) An explanation of customer satisfaction with alternative energy service;
(c) Actual net project costs incurred, including any:
(I) State or federal funding or tax credits;
(II) Gas planning pilot community incentives or funding;
(III) Existing dual-fuel utility program funding;
(IV) Additional dual-fuel utility incentives or funding;
(V) Customer contributions;
(VI) Anticipated total capital expenditures by the dual-fuel utility and customers, avoided utility capital expenditures, and future discounted customer utility bill savings or expenses; and
(VII) Estimated overall project costs if no incentives or tax credits had been available for the project;
(d) The impact on total energy bill and energy reliability for customers receiving alternative energy service;
(e) Any encountered barriers to project implementation, including technological or workforce barriers, and the lessons learned in overcoming those barriers;
(f) The impact on income-qualified utility customers and customers living in disproportionately impacted communities; and
(g) Any other information required by the commission.
(8) By July 1, 2028, or another time determined by the commission, the commission shall hire a third-party consultant to conduct an analysis of all approved and proposed neighborhood-scale alternatives projects and present the findings of the analysis to the commission and the general assembly. The analysis must include:
(a) For each project, the information set forth in subsection (7) of this section;
(b) A comparative analysis of net costs incurred by all parties in a neighborhood-scale alternatives project, compared with the cost of the gas infrastructure project that was avoided, including any:
(I) State or federal funding or tax credits;
(II) Gas planning pilot community incentives or funding;
(III) Existing dual-fuel utility program funding;
(IV) Additional dual-fuel utility incentives or funding;
(V) Customer contributions;
(VI) Anticipated total capital expenditures by the dual-fuel utility and customers, avoided utility capital expenditures, and future discounted customer utility bill savings or expenses; and
(VII) Estimated overall project costs if no incentives or tax credits had been available for the project;
(c) The ability of each project to defer or avoid gas infrastructure investments;
(d) The customer economics of nonemitting thermal resources compared with gas alternatives;
(e) An analysis of any supply chain challenges;
(f) The overall lessons learned from the projects;
or expenses; and
(VII) Estimated overall project costs if no incentives or tax credits had been available for the project;
(c) The ability of each project to defer or avoid gas infrastructure investments;
(d) The customer economics of nonemitting thermal resources compared with gas alternatives;
(e) An analysis of any supply chain challenges;
(f) The overall lessons learned from the projects;
(g) The perspectives of the gas planning pilot communities regarding the collaborative process with a dual-fuel utility and any lessons learned for improving the process;
(h) The net impacts to the utility workforce; and
(i) Any other information required by the commission.
