Colorado PUC opens clean-hydrogen emissions rulemaking

The Colorado Public Utilities Commission voted unanimously Aug. 19 to open a rulemaking on how investor-owned utilities would account for lifecycle greenhouse-gas emissions from clean-hydrogen production, the commission’s meeting record shows.

The action begins a rulemaking under House Bill 23-1281, which created Colorado’s clean-hydrogen tax-credit framework. The PUC identifies the matter as proceeding 23M-0569EG on its HB23-1281 implementation page. Commissioners approved a decision, referred the matter to an administrative law judge and retained jurisdiction. The vote starts a process; it does not make the proposed accounting rules final.

The meeting presentation described a framework intended to track the federal Section 45V clean-hydrogen tax credit. Federal law sets a maximum lifecycle-emissions rate of 4 kilograms of carbon-dioxide equivalent per kilogram of hydrogen, with larger credits available at lower emissions rates, the statute provides. Federal regulations also use incrementality, temporal matching and deliverability safeguards for electricity-related claims, the current eCFR rules say.

According to the commission presentation, utilities would use the federal 45VH2-GREET model or an emissions rate provisionally accepted by the IRS and submit an executable model with annual reporting. For electrolytic hydrogen, utilities would acquire and retire energy-attribute certificates in a qualifying registry, such as WREGIS or the RECs Registry. The certificates would have to meet proposed incrementality, temporal-matching and deliverability requirements.

The presentation described a 36-month incrementality test: The electricity generator would have to have begun commercial operations no more than 36 months before the hydrogen facility is placed in service. Electricity that otherwise would have been curtailed could qualify as incremental if the utility documented the expected curtailment and provided supporting information in its annual emissions report. Staff described that provision as a Colorado difference from the federal rules.

The proposed schedule would allow annual matching — electricity generated in the same calendar year as hydrogen production — through Jan. 1, 2030, followed by hourly matching. The meeting record contains two descriptions of geographic eligibility that could not be reconciled without the filed text. A statutory overview used by staff referred to delivery in the same load-balancing area as the electrolyzer, while the presentation described a federal-style Mountain region that includes Nevada, Utah, Wyoming and parts of Montana, California and South Dakota. The record does not establish whether the proposal chooses one standard, applies them in different contexts or otherwise defines their relationship.

For hydrogen made with biogas, renewable natural gas or fugitive methane, staff described proposed accounting for direct and indirect emissions, leaks and the methane’s alternative fate. Examples included animal-waste-management practices, flaring and productive use of fugitive methane from oil-and-gas operations. The presentation also described monthly matching of gas certificates to hydrogen production and said deliverability for natural gas would be satisfied when the gas was produced in the contiguous United States. It described certificates from a registry certified by the U.S. Treasury for the federal 45V credit, with an alternative for demonstrating exclusive delivery through a direct pipeline connection or another method if no certified registry exists.

Those methane, alternative-fate, gas-certificate and deliverability provisions are descriptions from the public meeting, not verified quotations from the filed decision or notice of proposed rulemaking. The filed documents’ precise language, including any definitions or exceptions, was not publicly retrievable in the reporting review.

The proceeding applies to future clean-hydrogen projects produced by investor-owned utilities. No named utility project was identified in the Aug. 19 record or the PUC’s implementation page. The presentation indicated that applications for particular projects and questions about a utility’s role in producing, selling or using hydrogen would be addressed in a separate proceeding.

The rulemaking also affects the state tax-credit process. The Colorado Energy Office says it may not issue clean-hydrogen tax-credit certificates until the PUC finalizes lifecycle greenhouse-gas accounting rules. The General Assembly’s HB23-1281 page describes the certificate prerequisite.

As of Aug. 20, the reporting review had not established the Colorado Register publication date for the proposed notice, the initial hearing date or the public-comment deadline. The PUC’s rulemaking guidance says an initial hearing must be scheduled at least 20 days after Register publication, the agency guidance states. Readers should check the filed notice and Colorado Register entry for the official schedule before submitting comments.