HB 23-1281

HB 23-1281, titled "Advance The Use Of Clean Hydrogen," is a Colorado law that defines clean hydrogen and sets requirements for investor-owned utilities to produce it. It mandates the Public Utilities Commission (PUC) to review projects related to clean hydrogen production by these utilities and establish rules for such projects by December 2024. The bill also provides tax credits for using clean hydrogen in hard-to-decarbonize industries, starting from January 1, 2024. Signed into law on May 22, 2023, it became effective on August 7, 2023, and impacts utilities, communities affected by these projects, and businesses that can benefit from the tax credits for using clean hydrogen.

Official Summary

Section 2 of the act defines clean hydrogen (clean hydrogen) as hydrogen that is: Derived from a clean energy resource that uses water as the source of hydrogen; or Produced through a process that results in lifecycle greenhouse gas emissions rates that are less than 1.5 kilograms of carbon dioxide equivalent per kilogram of hydrogen, as set forth in applicable federal law. Section 2 also requires, no later than September 1, 2023, the public utilities commission (commission) to initiate an investigatory proceeding to consider issues related to projects that result in the production of clean hydrogen by an investor-owned utility (clean hydrogen projects). Section 2 also requires, no later than December 1, 2024, the commission to adopt rules that establish clean hydrogen project requirements, including, if the commission determines cost recovery for clean hydrogen projects is appropriate, rules that require an investor-owned utility to present a clean hydrogen project to the commission for the commission's approval, unless the Colorado energy office (office) files a notice with the commission stating that the federal department of energy has extended or otherwise altered the deadline for funding of a project that is part of an application for federal funding by various entities that may include the production, transport, and use of clean hydrogen (hydrogen hub project). Section 2 also requires that, in reviewing a clean hydrogen project application, the commission consider whether it is in the public interest for an investor-owned utility to invest in a clean hydrogen project, the potential contribution of the clean hydrogen project in meeting the state's greenhouse gas emission reduction goals, and various other issues. If the clean hydrogen project is proposed to be sited in an area that would affect a disproportionately impacted community, the commission shall analyze the applicant's cumulative impacts analysis and determine whether the clean hydrogen project will have a positive effect on the disproportionately impacted community. Section 2 also requires that an investor-owned utility provide notice to the commission of any application for federal funding as part of a hydrogen hub project. Section 2 also requires an investor-owned utility that operates a clean hydrogen project approved by the commission to submit an annual report that reports various details about the clean hydrogen project to the commission. If the clean hydrogen project includes the use or consumption of clean hydrogen by the investor-owned utility, the investor-owned utility shall also report the lifecycle greenhouse gas emissions rates of the clean hydrogen project separately by each production facility and use. For income tax years commencing on or after January 1, 2024, but before January 1, 2033, section 3 creates a state income tax credit in specified amounts per kilogram of clean hydrogen used for hard to decarbonize end uses, for operating a heavy-duty vehicle, or for aviation (tax credit). Any taxpayer seeking to claim the tax credit must first apply for and receive a tax credit certificate from the office. The tax credit may be claimed for an amount not to exceed $250,000 in a tax year. For the 2023-24 state fiscal year, the act appropriates $360,758 from the public utilities commission fixed utility fund to the department of regulatory agencies for the following uses: $241,532 for use by the commission for personal services; $24,060 for use by the commission for operating expenses; and $95,166, which is reappropriated to the department of law to provide legal services to the department of regulatory agencies. For the 2023-24 state fiscal year, the act appropriates $12,861 from the general fund to the department of revenue, which is reappropriated to the department of personnel for the purchase of document management services. APPROVED by Governor May 22, 2023 EFFECTIVE August 7, 2023 NOTE: This act was passed without a safety clause and takes effect 90 days after sine die. (Note: This summary applies to this bill as enacted.)

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