5 Colo. Code Regs. § 1001-32-F
This Statement of Basis, Specific Statutory Authority, and Purpose complies with the requirements of the Colorado Administrative Procedure Act § 24-4-103, the Colorado Air Pollution Prevention and Control Act §§ 25-7-110 and 25-7-110.5, and the Air Quality Control Commission's (Commission) Procedural Rules.
Basis
The Commission adopted a new Regulation Number 28, Building Benchmarking and Performance Standards, to satisfy the requirements the General Assembly in House Bill 21-1286 (Concerning Measures to Improve Energy Efficiency) (HB 21-1286), set forth in § 25-7-142, C.R.S., directing the Commission's adoption of building benchmarking and performance standards for covered buildings by September 1, 2023.
Specific Statutory Authority
The Colorado Air Pollution Prevention and Control Act § 25-7-142(7) authorizes the Commission to promulgate rules to implement the benchmarking program established in HB 21-1286. § 25-7-142(8)(c) directs the Commission to adopt rules to establish building performance standards on or before September 1, 2023, "that will achieve a reduction in greenhouse gas emissions of [7%] by 2026 as compared to 2021 levels" and "a reduction in greenhouse gas emissions of [20%] by 2030 as compared to 2021 levels," as set forth in § 25-7-142(8). § 25-7-105(1)(e) authorizes the Commission to promulgate implementing rules and regulations to abate greenhouse gas (GHG) emissions consistent with the statewide GHG pollution reduction goals in § 25-7-102(2)(g). In adopting GHG abatement strategies and implementing rules, the Commission is authorized to take into account other relevant laws and rules to enhance efficiency and cost-effectiveness and solicit input from other state agencies and stakeholders on the advantages of different statewide GHG pollution mitigation measures, see §§ 25-7-105(1)(e)(II) and (IV). Implementing rules may include regulatory strategies that incentivize development of renewable resources and "enhance cost-effectiveness, compliance flexibility, and transparency around compliance costs," see § 25-7-105(1)(e)(V). Further, in promulgating such implementing rules, the Commission is to consider many factors, including, but not limited to, health, environmental, and air quality benefits and costs; the relative contribution of each source or source category to statewide GHG pollution; equitable distribution of the benefits of compliance; issues related to the beneficial use of electricity to reduce GHG emissions; and whether greater or more cost-effective emission reductions are available through program design, see § 25-7-105(1)(e)(VI).
§ 25-7-109(1) authorizes the Commission to adopt and promulgate emission control regulations that require the use of effective practical air pollution controls for each type of facility, process, or activity which produces or might produce significant emissions of air pollutants. An "emission control regulation" may include "any regulation which by its terms is applicable to a specified type of facility, process, or activity for the purpose of controlling the extent, degree, or nature of pollution emitted from such type of facility, process, or activity. . . .", see § 25-7-103(11). Emission control regulations may pertain to any chemical compound including GHG pollution, see § 25-7-109(2)(c).
§§ 24-38.5-112(1) and 24-38.5-112(1)(a) require the Colorado Energy Office (CEO) to implement a building performance program and to use "county assessor records and other available sources of information" to administer the building performance program. § 24-38.5-112(1)(a)(I) -(IV) requires CEO to create a database of covered buildings and of owners required to comply with the building performance program; track compliance with the building performance program; maintain a list of noncompliant owners; and provide the Division a list of noncompliant owners for the Division's enforcement of the building performance program pursuant to § 25-7-122(1)(i). The building benchmarking and performance standards rule was collaboratively drafted by the Division and CEO before it was brought before the Commission. CEO is responsible for the implementation and continuation of the building benchmarking and performance standards requirements while the Division is responsible for enforcement of the rule.
Purpose
The Commission established building benchmarking and building performance standards (BPS) as one means to track and reduce greenhouse gas (GHG) emissions in the built environment from a 2021 baseline. Buildings constructed after 2021 that would be considered covered buildings under this regulation will also be required to meet the building benchmarking and performance standards. To demonstrate compliance with the BPS, the Commission adopted a flexible, compliance pathway based approach to reducing emissions through improvements in energy efficiency, high-efficiency electrification of space heating and cooling and water heating, or a combined approach that may also include the installation of customer-owned retail distributed generation systems. In adopting the BPS, the Commission considered the recommendations of the Building Energy Performance Task Force (BPS Task Force) convened by the Colorado Energy Office (CEO), as directed by HB 21-1286. Pursuant to § 25-7-142(8)(c)(II), the Commission is, by rule, adopting performance standards that meet the requisite GHG emission reductions.
Applicability
New Buildings
Buildings constructed after 2021 that would be considered covered buildings under this regulation will also be required to meet the building benchmarking and performance standards. Buildings constructed after 2021 must start collecting benchmarking data once the owner has received a certificate of occupancy for the building. A new building must comply with its applicable building performance target by the specified target date.
Public Buildings
Public buildings become subject to the building performance standards of this regulation only after undertaking a construction or renovation project that has an estimated cost of at least $500,000 and impacts at least twenty-five percent of the covered building's square footage. A construction or renovation project that will trigger compliance with the building performance standards either (1) impacts a square footage of twenty-five percent or greater or (2) impacts an area of that size or greater through changes to heating and cooling systems, insulative measures, changes to the building envelope, or other such measures. For purposes of this rule, the "project" shall be the aggregation of any construction or renovation work on a public building that is part of the same bidding process, happens contemporaneously or sequentially within an eighteen month period, or that would otherwise be reasonably considered to be part of or substantially related to the same project.
Public buildings constructed after 2021 that would be considered covered buildings under this regulation will also be required to meet the building benchmarking and performance standards. Public buildings constructed after 2021 must start collecting benchmarking data once the owner has received a certificate of occupancy for the building. Public buildings constructed after 2021 must comply with the building performance standards requirements if the construction has an estimated cost of at least $500,000.
In situations where a public entity shares its building space with other non-public entities, the owner of the covered building, whether the public entity or not, is still required to report benchmarking data. In multi-owner situations, the party responsible for compliance will be the owner listed in the tax assessor's records for that building and must comply with building performance standards if the covered building has a shared, centralized heating and/or cooling system. If a public entity leases a covered building or a portion of a covered building, the building owner is responsible for compliance with the benchmarking and building performance standards. Whether the public entity may also have some responsibility related to compliance will depend on the lease arrangement between the public entity and the building owner, as with any other owner-tenant situation.
Condominiums and Townhomes
§ 25-7-142(2)(j)(II)(C) states that "a single-family home, duplex, or triplex" is not a covered building under the building benchmarking and performance standards. Properties such as townhomes and condominiums are similar to single-family homes, duplexes, or triplexes in that the condominium or townhome units within the envelope of a building are individually owned units and may have their own heating and cooling systems. However, condominium or townhome buildings differ from a single-family home in both the energy usage and, thus, the potential opportunity to reduce energy use and associated building greenhouse gas emissions when the condominiums or townhomes share a centralized heating and/or cooling system. Therefore, the Commission determined that condominiums or townhomes that share a building or together comprise a building, are covered under the building benchmarking and performance standards if they have shared centralized heating and cooling systems for water or air conditioning throughout the units of the building. The party responsible for compliance for covered buildings composed of condominiums or townhomes, or any covered building with split ownership, will be the owner listed in the tax assessor's records for that building whether it be a person, group, organization, or business. Where tax records do not clearly identify a single owner, the person holding themselves out to be the owner or responsible party may be identified through other means.
Federal Buildings
The Commission has determined that federal buildings are subject to and must comply with the Benchmarking and Reporting Requirements in Part B of this rule.
The Commission recognizes that there is currently a Federal Building Performance Standard that establishes 2030 and 2045 goals for reducing emissions from federal buildings. As long as the Federal Building Performance Standard is in effect, federal buildings that would be covered by the Colorado Building Performance should instead comply with the requirements of the Federal Performance Standard. However, the Commission reserves the right to regulate federal buildings in the event that the Federal Building Performance Standard is modified or eliminated."
Benchmarking
In Part B, the Commission adopted requirements for owners of covered buildings to submit energy-use benchmarking data. Using benchmarking data to create baseline energy usage allows building owners to track and measure their energy usage in relation to prior years and progress towards performance standard targets established in Part C.
Annual Reporting
§ 25-7-142(3) requires owners of covered buildings to annually submit, starting June 1, 2024, and by June 1 of each year thereafter, benchmarking data for the previous calendar year to CEO. Buildings constructed after 2021 will be required to submit benchmarking reports starting with the first full year of data after the building has started operating. This data must include all of the applicable building data required by the rule and data quality checks to ensure that the data is correct and accurate. Building owners must also include any change in building information in the annual reporting such as changes to property type or building ownership. Certain building owners may be allowed to benchmark their buildings as a campus if they meet the requirements for campus reporting in Part B. Covered building owners must include in the 2027 benchmarking data report a demonstration that the covered building met the 2026 building performance standard requirements as provided in Part C; the same applies to 2031 reporting with respect to the 2030 building performance standard requirements.
Currently, there is no option in the ENERGY STAR® Portfolio Manager for a building to select "marijuana cultivation facility" in the building type field when reporting benchmarking data. CEO has never exempted marijuana cultivation facilities from any reporting requirements. Denver has recently made changes to its program and directed marijuana cultivation facilities to select "manufacturing" in ENERGY STAR® Portfolio Manager when reporting benchmarking data. Consistent with Denver's program, Regulation Number 28 specifies that marijuana cultivation facilities must report their property type as "manufacturing" in ENERGY STAR® Portfolio Manager and that marijuana cultivation facilities that are covered buildings will be assigned an individualized target for purposes of complying with the building performance standards should the facility owner choose not to comply with the standard percent reduction compliance pathway. To avoid confusion, the definition of "manufacturing purpose" explicitly excludes these facilities for the purpose of the exemption from the definition of "covered building" in Section III.O.2.
Waivers, Extensions, and Exemptions
§ 25-7-142(5) allows covered building owners to seek a waiver or time extension from the annual benchmarking requirement for a given year if the owner submits waiver documentation to, and receives approval from, CEO. Building owners eligible for the 2021 benchmarking waiver will automatically be assigned an energy-use intensity (EUI) target. A covered building owner may also request a benchmarking time extension from CEO if the owner submits documentation to CEO demonstrating that, despite the owner's good-faith efforts, the owner was unable to complete the benchmarking report for the relevant year. This allows the building owner more time to aggregate their building's benchmarking data so they can submit at a later date. Covered building owners must submit a waiver application to CEO any time after June 1 of the calendar year to be benchmarked and on or before May 1 of the reporting year, unless CEO adopts an alternate timeline for submitting a waiver application.
The Commission also adopted provisions for building owners to seek an exemption from CEO if the building does not meet the definition in § 25-7-142(2)(j) of a covered building (i.e., storage facilities, stand-alone parking garages, or airplane hangars that lack heating and cooling; buildings with more than half of the gross floor area used for manufacturing, industrial, or agricultural purposes). The adoption of these exemption provisions recognize that building uses may change over time and that building owners may want documented clarity of whether or not the building is subject to the benchmarking requirements.
Building Performance Standards (BPS)
Building performance standards create energy performance targets, such as a specific level of energy usage or reduction for buildings to meet after a set amount of time. These standards help drive energy efficiency improvements and reduce energy use and resulting GHG emissions over the course of implementation.
BPS Task Force Recommendations
Pursuant to § 25-7-142(8)(a), CEO convened the BPS Task Force to develop recommendations for the Commission to consider when adopting rules for building performance. CEO timely delivered the BPS Task Force recommendations to the Governor's Office, General Assembly, and Colorado Department of Public Health and Environment by October 1, 2022, consistent with § 25-7-142(8). The recommendations made by the BPS Task Force, and included in the report, were approved by two-thirds of the BPS Task Force members. These recommendations are available on the Colorado Energy Office's (CEO) Building Performance Standards website under the Task Force Recommendations.
In developing the recommendations, the BPS Task Force was comprised of members with experience from a broad range of industries and building owners; examined building types of unique energy needs including aviation facilities, nursing homes, and hospitals; and considered how the performance standards and the greenhouse gas reductions would not include savings from statewide decarbonization of electricity or natural gas utility grids but include savings from utilities' or local governments' energy efficiency programs.
The BPS Task Force also made recommendations related to workforce availability and development related to building energy performance; financial and nonfinancial costs and benefits of upgraded building energy performance; availability of programs, technical assistance, and incentives to support building owners, utilities, and local governments; opportunities to improve commercial building energy use in Colorado; how regulations and agency support could help ensure building owners avoid fines through compliance with performance standards.
Rule Design and GHG Emissions Reductions
Enacting a building performance regulation to reduce GHG emissions ensures that large building owners participate in the reduction of emissions from the built environment. Building energy usage and GHG emissions are correlative, which allows for building performance standards to influence consumer decisions and therefore induce reductions of statewide building emissions. The Commission adopted building performance standards that will require covered buildings to implement measures that, taken together, are expected to achieve GHG emission reductions from this segment of covered buildings in the building sector of 7% by 2026 and 20% by 2030, as compared to 2021 levels. Based on benchmarking data reporting 2021 data in 2022, covered buildings subject to these rules were responsible for approximately 8,878,000 metric tons of carbon dioxide equivalent emissions resulting from the energy consumption of those buildings.
Pursuant to § 25-7-142(8)(c)(II), the Commission adopted performance standards to meet the requisite GHG emission reductions. In calculating the statewide GHG emission reductions anticipated to result from these regulations, the changes in emissions are not separate from those realized by the utilities as part of the statewide GHG inventory. This overlap in emissions impacts is recognized in § 25-7-142(8)(a)(IV), which directs that "[i]n calculating greenhouse gas reductions pursuant to §25-7-42(8), the calculation must not include savings from statewide decarbonization of electricity or natural gas utility grids, but may include savings from utilities' or local governments' energy efficiency programs." Thus, while these rules are anticipated to drive GHG emission reductions to meet the targets, it is important to note that these reductions will not be independently reflected in the statewide GHG inventory but rather as one means of reducing emissions attributable to energy consumption by driving down demand and consumption of carbon-intense energy sources. It is also important to note that the greenhouse gas targets from § 25-7-142(8)(a)(II)(A) and § 25-7-142(8)(a)(II)(B) must be adjusted to account for the addition of future building stock. Factoring the increase of new building stock into the greenhouse gas emissions targets means that the initial targets would need to be increased from 7% by 2026 and 20% by 2030 to 9.6% by 2026 and 23% by 2030.
Accordingly, the compliance pathways provided for in Part C are designed to provide owners of covered buildings flexibility in compliance based on the unique characteristics of each individual building while also ensuring that overall compliance will accomplish the GHG emissions reduction targets in § 25-7-142(8)(a)(II)(A) and § 25-7-142(8)(a)(II)(B). The building performance standard requirements adopted by the Commission allow for different metrics to be measured against a 2021 baseline so that progress can be tracked and compared to the GHG emission reduction targets. Owners of covered buildings must meet and maintain compliance with the 2026 targets each year from 2026 through 2029 until the covered buildings must meet and maintain the 2030 targets. Owners of covered buildings must meet and maintain compliance with the 2030 targets each year from 2030 on until future targets are established for beyond 2030.
Compliance Pathways
In Part C, Sections I.A. and I.B., the Commission adopted two compliance pathways for covered building owners to comply with performance standards: energy efficiency and greenhouse gas reductions. Improving energy efficiency is the preferred compliance pathway. This compliance pathway requires building owners to implement energy efficient changes or upgrades to their buildings to reduce the building's EUI to meet the building's assigned weather normalized site EUI target. Improving site EUI reduces GHG emissions by reducing demand for gas and electric service and, therefore, reducing the emissions from the generation or consumption of that energy. In Part C, Table 1, the Commission established weather normalized site EUI by property type that covered buildings are to achieve by 2026 as an interim performance standard, pursuant to § 25-7-142(8)(a)(II). The 2026 weather normalized site EUI targets in Table 1 were determined to represent a 7% reduction in GHG emissions across covered buildings as compared to the baseline, after accounting for growth of new construction, established through the 2021 benchmarking data collected and analyzed by CEO. The 2030 weather normalized site EUI targets in Table 1 were determined to represent a 20% reduction in GHG emissions across covered buildings as compared to the baseline, after accounting for growth, established through the 2021 benchmarking data collected and analyzed by CEO.
In Part C, Section I.A.3., the Commission adopted a standard percent reduction compliance pathway option to the energy efficiency compliance pathway that allows covered buildings to meet and maintain fixed EUI reductions by the 2026 and 2030 compliance periods. Buildings complying with the energy efficiency standard percent reduction compliance pathway must reduce their EUI by 13% in 2026 and by 29% by 2030 from their 2021, or first reporting year, benchmarked baseline weather-normalized EUI.
For existing buildings that did not submit a 2021 benchmarking report, the building will be subject to the weather normalized EUI target for the property type as identified in tax records that was established as the average of the data submitted by the similar building types. In calculating site EUI targets, where sufficient data for a particular building type was lacking in the 2021 benchmarking baseline, other national and local building energy data sets, such as ENERGY STAR and the Commercial Buildings Energy Consumption Survey (CBECS), were used to determine the EUI target for that property type. Under this compliance pathway, buildings constructed after 2021 must also comply with their property type EUI target. If a new building is unable to provide benchmarking data, the building will be assigned a EUI target for the property type as identified in tax records based on similar property types that benchmarked their data or from the Commercial Buildings Energy Consumption Survey (CBECS).
The demonstration of compliance with the energy efficiency compliance pathway will be completed through the ENERGY STAR® Portfolio Manager tool that will provide a building owner with a covered building's weather-normalized site EUI.
Under Part C, Section I.B., a covered building unable to achieve the required GHG emission reductions through the compliance pathway of energy efficiency may achieve the required GHG emission reductions and demonstrate compliance individually or through a combination of energy efficiency, electrification, and/or the use of customer-owned retail distributed generation systems to offset grid-based electricity. Electrification requires covered building owners to replace or avoid fossil fuel-based space heating, water heating, or cooking equipment by using high efficiency electric equipment. High efficiency electric equipment means using electrical equipment with less required energy to perform the same function by eliminating energy waste. For example, high-efficiency electric equipment may be certified according to ENERGY STAR, meet Federal Energy Management Program (FEMP) efficiency requirements, meet the current version of American Society of Heating, Refrigerating and Air-Conditioning Engineers' (ASHRAE) Standard 90.1 or IECC 2021 International Energy Conservation Code (IECC), or meet newer such requirements. Electrification also reduces emissions by shifting fossil fuel-based building end-uses to the electrical grid, which is a lower-emitting energy supply source that will achieve deeper emissions reduction as the grid is progressively supplied by greater amounts of renewable energy. The Commission encourages the building owner to coordinate and communicate with their utility provider if the building is planning on implementing full or significant electrification of the building.
In Part C, Section I.B.2., the Commission adopted a standard percent reduction compliance pathway option to the GHG intensity reduction compliance pathway that allows covered buildings to meet and maintain fixed GHG intensity reductions by the 2026 and 2030 compliance periods. Buildings complying with the GHG intensity standard percent reduction compliance pathway must reduce their GHG intensity by 13% in 2026 and by 29% by 2030 from their 2021, or first reporting year, benchmarked baseline that has been converted to a GHG intensity value. Building owner's choosing to use the GHG intensity standard percent reduction compliance pathway will calculate their building's baseline year emissions and their 2026 and/or 2030 emissions using the ENERGY STAR® Portfolio Manager's Building Emissions Calculator and apply a Colorado-specific emission factor for electricity use in the calculator for the baseline year and years 2023 to 2026 and a separate Colorado-specific emission factor for the baseline year and years 2027 and beyond, and compare the difference between the baseline year calculation and the target year calculation to determine the percent reduction. Both of these emission factors reflect the statewide decarbonization of the electricity utility grid and ensures that the building's 2021 baseline and 2026 and/or 2030 reductions reflect the same status in grid decarbonization.
Customer-owned retail distributed generation allows a building to develop renewable resources to reduce use of grid-based energy and therefore reduce some portion of the building's emissions; however, the use of renewable resources may only be used as a compliance mechanism after the covered building owner has exhausted other options. A covered building owner using distributed generation must demonstrate ownership or long-term control of the resource for covered building owners that choose the GHG intensity compliance pathway. The following forms of retail distributed generation recognized under 40-2-124(1)(a)(VIII) are eligible for compliance after demonstrating in an energy audit that a building owner has maximized the economic use of energy efficiency and electrification and exhausted cost-effective compliance measures for the covered building.
* On-site renewable energy.
* Off-site renewable energy that is located on non-contiguous property owned or leased by the covered building owner consistent with the off-site net metering program authorized by 40-2-124(1)(e)(I)(C).
* A community solar garden subscription consistent with 40-2-127(2), so long as the covered building owner has a subscription term of at least five years. A covered building owner must maintain the subscription in order to maintain compliance.
* On-site aggregated net metering distributed generation installations recognized under 40-2-124(1)(j), including master metered net metering installations and individually metered multi-unit net metering installations.
Customer-owned retail distributed generation systems, retail distributed generation, and energy procured through a power purchase agreement may be counted toward compliance if the covered building owner retains the renewable energy credits (RECs) associated with the project, or if the RECs associated with the project are retired on the covered building owner's behalf for no more than the amount of electricity produced by the customer-owned retail distributed generation system or retail distributed generation, or procured through a power purchase agreement that is consumed by the building. Legacy projects where RECs were transferred to the utility as a term of the project to decrease upfront costs may also be used for compliance if the covered building owner procures and retires RECs from another renewable energy resource located within Colorado that do not exceed the amount of energy produced by the covered building owner's legacy system and consumed by the covered building.
The Commission recognized the need for additional flexibility for under-resourced buildings and allowed the owners of under-resourced buildings to use utility subscription services as a compliance measure after the owner has exhausted cost-effective energy efficiency and electrification measures as demonstrated in an energy audit. Under-resourced building owners are the only covered building owners that may use utility subscription services as a compliance measure within the GHG intensity compliance pathway in this regulatory program.
Other forms of renewable energy may be considered in the compliance pathway in consultation with CEO. For example, using wastewater thermal energy recovery systems may result in a reduced energy usage for the building that would be reflected in the building's benchmarking data and GHG emissions but not as a REC. Similarly, a demand response or demand flexibility program may be considered as a means to reduce a covered building's overall EUI, so long as there is adequate information to demonstrate the reduction in GHG emissions. The building benchmarking and performance standards overall goal is to lower a building's greenhouse gas emissions and other forms of renewable generation or recovery can allow a building to do that by reducing reliance on other forms of emissions-generating sources for a building even if the renewable generation or recovery is not directly accounted for in the benchmarking tool. CEO will work with the Division and stakeholders when considering other programs and emerging technologies that can be used to reduce the EUI and/or greenhouse gas emissions of buildings in the future.
In order to demonstrate compliance with the GHG emissions reduction compliance pathway, building owners must use the ENERGY STAR® Portfolio Manager's Building Emissions Calculator and report the results for a covered building from the calculator. The reporting must be accomplished by downloading the results from the calculator in a spreadsheet (.xlsx) file that is submitted to CEO. If utilizing electrification to demonstrate compliance through this compliance pathway, the applicable 2023 through 2026 or 2027 and beyond Colorado-specific emission factor for electricity must be used and will be specified in the calculator. The U.S. Environmental Protection Agency (EPA) operates both ENERGY STAR® Portfolio Manager and the Building Emissions Calculator, which are currently separate tools, but these tools are able to work together. However, EPA is planning to integrate the functionality of the Building Emissions Calculator directly into ENERGY STAR® Portfolio Manager at which point calculations of a covered building's GHG emissions for demonstrating compliance with the GHG emissions reduction compliance pathway may be completed using the calculator functionality in ENERGY STAR® Portfolio Manager and its associated reporting function.
In Part C, Table 1, the Commission established greenhouse gas emission targets by property type for this compliance pathway that covered buildings must achieve by 2026 and 2030, pursuant to § 25-7-142(8)(c)(II). The 2026 greenhouse gas emission targets in Table 1 were determined to represent a 7% reduction in GHG emissions as compared to the baseline, accounting for growth, established through the 2021 benchmarking data collected and analyzed by CEO. The 2030 greenhouse gas emission targets in Table 1 were determined to represent a 20% reduction in GHG emissions as compared to the baseline, accounting for growth, established through the 2021 benchmarking data collected and analyzed by CEO.
In Part C, Sections I.C. and I.D., the Commission adopted processes for the establishment of individual targets for certain categories of covered buildings, specifically mixed use buildings as defined in Part A, Section III.DD., data centers, buildings with installed electric vehicle (EV) charging stations that are not able to be sub-metered, and marijuana cultivation facilities. At the time of rule adoption, the Commission did not have data available to establish property type targets for these buildings in Table 1 that would enable compliance with energy efficiency of greenhouse gas intensity reduction pathways. Mixed use buildings may identify a primary property type in ENERGY STAR® Portfolio Manager where one property type accounts for more than 50% of the building's gross floor area. However, due to the variety of potential energy needs of the different property types represented in the building, CEO will assign an individualized target to every mixed use building as defined in Part A, Section III.DD. that does not use the standard percent reduction compliance pathway. The individualized target will be based on the percentage of gross floor area assigned to each property type in the building and other factors detailed in Part C, Section I.D. CEO will use each building's ENERGY STAR® Portfolio Manager benchmarking report to track compliance with these individualized targets.
Data centers will be assigned a power usage effectiveness (PUE) target, due to the unique energy needs of such buildings. CEO will only assign stand-alone data centers a PUE target, as outlined in Part C, Section I.C. Mixed use buildings that include a data center will be assigned an individualized target pursuant to Part C, Section I.D. Buildings with EV charging stations that are not able to be sub-metered will be assigned a target representative of the building's energy use minus the EV charging station energy use. EPA is planning to add functionality to ENERGY STAR® Portfolio Manager for building owners to exclude the energy use of EV charging stations, which would allow both a recalculation of the building's 2021 baseline and future reporting to exclude EV charging station energy use via reporting rather than through the individualized target process. Electricity used for EV charging, regardless of whether it is sub-metered, is intended to be excluded from energy use by covered buildings under this program. Lastly, as discussed above, marijuana cultivation facilities will select the property type of manufacturing in ENERGY STAR® Portfolio Manager. However, because a manufacturing property type target may not be appropriate for such facilities, CEO will assign an individualized target at the facility owners' request for each marijuana cultivation facility based on the facility's gross floor area and energy usage. As with mixed use buildings, data centers, marijuana cultivation facilities, and covered buildings with EV charging are also not limited from complying the compliance pathways in Part C, Sections I.A. or I.B.
The BPS Task Force recommendations suggested consideration of the possibility of demand response/flexibility as an additional compliance pathway to help achieve the GHG emission reductions because the technologies shift the building's energy demand to non-peak times. Grid-interactive efficient buildings are energy efficient buildings that use smart technologies, batteries, and on-site distributed energy resources to provide demand flexibility while co-optimizing for energy cost, grid services, and occupant needs and preferences in a continuous and integrated way. At the time these rules were adopted, there was insufficient infrastructure and no standardized industry methodology for measuring a building's demand response/flexibility capabilities to support demand response/flexibility as a compliance pathway. However, the Commission recognizes the value in demand response/flexibility integration in buildings to better control building energy use and encourages the continued investigation into potentially crediting covered buildings for the use of these programs in the future.
Compliance Adjustments
Under Part C, Section II., when a covered building cannot achieve compliance with the building performance standards through the compliance pathways, the Commission adopted a process by which the covered building owner may request timeline and/or performance target adjustments. Section II. provides examples of circumstances under which a covered building owner may apply for a compliance adjustment. The following provides some demonstrative context for those requirements.
* "Cost prohibitive" refers to the steps that a building owner would need to take to demonstrate the cost of compliance is higher than the benefit.
If the equipment has a resale/salvage value, the cost of that equipment is the upfront cost minus the salvage value. If the buyer has obtained incentives (utility, local, state, or federal) for buying the equipment, then the cost of the equipment is further reduced by the amount of the incentive received. The cost of installing the equipment and the cost of its upkeep during its useful life are then added to that cost figure to determine the overall cost of the equipment.
The benefits of installing the equipment include reduced energy use and reduced emissions. The dollar amount of that energy savings is determined by multiplying the amount of energy saved by the price of energy of the applicable fuel as forecasted by the U.S. Energy Information Administration for the target year of compliance plus anticipated demand response savings.
The social cost of greenhouse gases are the most recent assessment of the social cost for those greenhouse gases for which the federal government has determined the cost. However, it cannot be below the figure set in 2016 using a two and one-half percent discount rate as established by the federal interagency working group on the social cost of carbon. The dollar value of emission reduction is determined by multiplying the amount of emission reduction in metric ton of carbon dioxide equivalent by the social cost of greenhouse gases. The total benefit associated with installing equipment is, thus, determined by adding the dollar amounts of energy savings and of emission reduction using the social cost of greenhouse gases.
Whereas some of the costs and benefits are obtained in the year the equipment is installed, the rest occur over the useful life span of that equipment. Because benefits/costs that occur in the future are not valued the same way as benefits/costs that occur in the year of investment, those figures have to be discounted so that their present value equivalents can be determined. If the equipment has a two-year useful life, any benefit/cost that is incurred in the second year is discounted using the following formula:
In calculating present value, "r" is the discount rate (e.g., when using a 2.5% discount rate, use 0.025) and "2" is used in this example because the benefit/cost is occurring in the second year. This calculation provides the second year's benefits/costs in the present year's terms. Adding the first year's value and the present value version of the benefit/cost that occurred in the second year provides the equipment's benefit/cost over its useful lifetime of 2 years. For benefits/costs that are incurred/obtained in the third, fourth, and other years in the equipment's useful life, use 3, and 4, and others as applicable. Applying this procedure to each benefit and cost item results in the total net present value of cost and benefits associated with that equipment. If the total present value of the benefit is higher than the present value of cost, then this equipment is not cost prohibitive. If the present value of the cost is higher than the present value of benefit, then the equipment is cost prohibitive.
* "Inherent and unique characteristics" refer to qualities specific to an individual building that limits the building from complying with the building performance standards (e.g., age, design, distinct features, physical characteristics). These traits are not generalized between building types, are unique to the applicable building, and must be approved by CEO before receiving a compliance adjustment.
* "Significant variations in operations from a standard building in that building type category" refers to a building that belongs to a certain building type category that may not have the same building function, design, or construction as other buildings in the same category.
* "Under-resourced building" refers to a building with less access to resources, including revenues, funding, grants, or gifts that can help with building operations or to comply with the requirements of this rule, than other buildings within the same building type in the same utility service territory.
In addition, a covered building utilizing a novel alternative emissions reduction technology, such as carbon capture, could qualify under the compliance adjustment provisions as its operations would have a significant variation from other buildings through use of such a technology. Part C, Section II. provides an avenue for consideration of other alternative reduction technologies such as carbon capture through the adjusted performance target provisions. Specifically, Section II.B.3.b. allows "covered buildings with significant variations in operations from a standard building in that building type category" to apply for an adjusted target.
Buildings seeking a compliance adjustment under Part C, Section II., must have an energy audit performed on the building to demonstrate why the building was unable to reach compliance. The energy audit must follow the requirements in the United States Department of Energy's Building Energy Audit Template, ASHRAE's standard 211-2018 or more current level 2 audit, or an energy audit of similar requirements approved by CEO. All energy audits submitted for compliance adjustments must be performed by an accredited third-party auditor. Examples of acceptable energy auditor certifications are Certified Energy Auditor (Association of Energy Engineers), Certified Energy Manager (Association of Energy Engineers), Building Energy Assessment Professional (ASHRAE), Energy Management Professional (Energy Management Association), Multifamily Building Analyst (Building Performance Institute), or other energy auditor accreditations or certification recognized or deemed equivalent by the United States Department of Energy. The EUI target adjustment request must also include an inventory of all existing air and water heating and cooling equipment and an inventory of all required equipment needed to meet the building's assigned EUI or emission target. In approving adjustments, CEO may consider standard target adjustments based on the Environmental Protection Agency (EPA) suggested methods in addition to the other factors outlined in the target adjustment process in Part C, Sections II.B. and II.C.
Certain covered buildings in Denver receive steam from the Denver District Steam System for a variety of purposes, including space heating, use in steam radiators, and heating domestic hot water. At the time of this rulemaking, the Denver District Steam System was subject to a proceeding before the Colorado Public Utilities Commission (Proceeding Number 22A-0382ST) regarding the operations of the system through 2030 and consideration of alternate technologies to replace the system. Acknowledging this uncertainty and its potential impact on large capital investments, the Commission recognizes that covered buildings on the Denver District Steam System may qualify to apply for either a timeline or performance target adjustment. However, any such adjustment would need to be substantiated in accordance with Part C, Section II. and would be at the discretion of CEO.
Penalties
Pursuant to § 25-7-122(1), the Commission adopted civil penalty provisions related to a covered building owner's failure to comply with the benchmarking and building performance standards requirements. § 25-7-122(1) specifies values of $2,000 for a first violation of the performance standards and $5,000 for a second violation. In addition to these provisions, the Commission adopted additional reporting and compliance demonstration requirements for building owners that fail to comply with the building performance standards, clarifying that building owners must demonstrate progress until coming into compliance and that failure to do so may result in a finding of additional violations. The Commission expects that the potential for these additional penalty assessments will further incentivize covered building owner compliance.
Utility Data Reporting
§ 25-7-142(4) contains statutory requirements incumbent upon qualifying utilities concerning the collection and provision of energy-use data for its customers, including covered building owners and tenants. Both the definition of "qualifying utility" at § 25-7-142(2)(u) and the duties created under § 25-7-142(4) are explicit and clear. These provisions are enforceable as a provision of part 1 of the Act by the Commission and Division under § 25-7-115. Furthermore, qualifying utilities providing electric service are subject to extensive data gathering and provision requirements in the Colorado Public Utilities Commission's (PUC) Rules Regulating Electric Utilities at 4 CCR 723-3, Sections 3025 - 3035 concerning "Customer Data Access and Privacy." Under these PUC rules, customers may request the release of this information through the Consent to Disclose Utility Customer Data form. Given these preexisting statutory and regulatory duties governing this conduct, the Commission did not adopt any additional rules in this regard.
Sale and Lease of Covered Buildings
§ 25-7-142(6) contains statutory requirements dependent on the sale or lease of buildings covered under the building performance standards. If a covered building or a portion of a covered building is for sale or lease, the covered building owner must provide an electronic copy of the building's reported benchmarking data to all prospective buyers or lessees, any brokers as defined in § 12-10-201(6) C.R.S., any person making an inquiry about the property, or any major commercial real estate listing services on which the property is listed. The benchmarking data should be of the building's previous calendar year or from the most recent twelve-month period of continuous occupancy. If a covered building changes ownership, the former owner must make available to the new owner the energy-use data, utility customer consent documentation, and any other information about the property that is necessary to benchmark the covered building. The former owner must transfer to the new owner both the record representing the covered building's information in the benchmarking tool and the request to a qualified utility for aggregated data. The new owner may request and receive from a qualifying utility the aggregated data necessary to fulfill benchmarking reporting requirements. Given these preexisting statutory and regulatory duties governing this conduct, the Commission did not adopt any additional rules in this regard.
Future Year Standards
§ 25-7-142(8)(a)(II)(C) granted the BPS Task Force the opportunity to provide recommendations for "advising, soliciting public input on, and making recommendations to the commission on performance standards for 2030 to 2050" that will align with the State's 2050 GHG reduction targets. The Commission understands that CEO will continue to evaluate submitted benchmarking data as well as compliance demonstrations to evaluate implementation and performance under this regulation and encourages CEO to consider convening a new task force to evaluate potential future revisions to these standards as well as to evaluate additional building performance standards beyond 2030.
The CEO will report to the Commission on the implementation of Regulation Number 28 on a regular basis. The report may include information on benchmarking reporting statistics, benchmarking waivers and exemptions, the number of requests for adjustments received and the number of adjustments granted, and other information regarding program implementation. The Division will also report to the Commission on the implementation of Regulation Number 28 on a regular basis to provide updates on progress towards meeting the 2026 and 2030 targets, penalties, and any other information regarding program implementation.
The Colorado Department of Public Health and Environment will undertake future rulemakings as needed after evaluating implementation of the rule and its effectiveness in achieving statutory greenhouse gas emission reduction targets, and make needed improvements, including in 2027 or early 2028 as informed by the compliance data for the 2026 targets.
Finally, the Commission recognizes that Regulation Number 28 is a new program and will apply to many entities that have not previously been subject to rules promulgated by the Commission. Throughout this rule, language has been developed to ensure that this rule provides reasonable flexibilities and is cost-effective for owners of covered buildings, including approving, where appropriate, adjustments to performance targets and timelines which may extend beyond 2030, while simultaneously ensuring that the state will meet the targets established in § 25-7-142(8)(c).
Federal vs. State-Only Conditions (if applicable)
The revisions to Regulation Number 28 do not exceed or differ from the requirements of the federal act or rules, therefore, 25-7-110.5(5)(a) does not apply.
Findings of Fact
5 CCR 1001-32-F