A Discounted Electricity Tier for Colorado Families—And Why Utilities Might Have to Foot the Bill

What This Bill Actually Does

At its core, SB26-002 attempts to rewrite the unwritten contract between Colorado residents and our largest utility monopolies. For over a century, investor-owned electric utilities (in Colorado, that means Xcel Energy and Black Hills Energy) have operated under a specific deal: the state grants them a monopoly over certain territories and guarantees them a healthy rate of return, and in exchange, they provide reliable power to everyone. But as the bill's legislative declaration points out, electricity is no longer a luxury—it is a mandatory requirement for basic modern survival. This bill creates a First Allotment of Residential Electricity (FARE) service to ensure that low-income families can afford the bare minimum power they need to live.

Here is how the FARE program works in practice: Utilities will be required to calculate the exact amount of electricity an average household needs to run the essentials—think keeping the refrigerator cold, a few lights on, and basic heating or cooling. This becomes the minimum level of electricity. For income-qualified customers, the utility must sell this baseline allotment of power at a marginal cost rate. In plain English, that means the utility can only charge what it actually costs them to generate and deliver that specific unit of power (fuel, basic maintenance, taxes), without the standard profit markups they usually bake into residential rates. If a customer uses more power than the minimum allotment, they simply pay the standard rate for the extra juice.

But here is the part that matters most to the rest of the state. Historically, when a utility offers a heavily discounted rate to one group of people, they cover their losses by subtly raising rates on everyone else—a practice known as cost-shifting. Section 4 of this bill explicitly outlaws that. The bill legally prevents the implementation of the FARE service from directly increasing the cost of utility service for non-qualifying customers. If a utility submits a proposal showing that middle-class or commercial ratepayers would have to pay more to subsidize the low-income discount, the Public Utilities Commission (PUC) is legally required to deduct that exact cost difference straight out of the utility's allowed profit margin.

What It Means for You

If you are an everyday Colorado resident paying standard utility rates, your first question is probably, "Am I going to end up paying for this?" Thanks to the strict guardrails written into this legislation, the answer should be no. The bill is specifically designed to protect middle-income ratepayers from bearing the burden of this new social safety net. You will not see a "FARE Program Surcharge" quietly tacked onto the bottom of your monthly Xcel bill, because the law forces the utilities to cover the discount out of their guaranteed profits rather than passing the buck to you.

If you are an income-qualified utility customer (which generally means your household income falls below certain federal poverty guidelines used for existing state assistance), this bill is a massive game-changer. Starting with rate cases filed in 2027, you will automatically get a specific chunk of your monthly electricity for significantly less than what you pay now. It acts as a lifeline, ensuring that a cold snap or a summer heatwave won't force you to choose between keeping the lights on and buying groceries. Just keep in mind that this only applies if you get your power from an investor-owned utility. If you live in an area served by a municipal utility (like Colorado Springs Utilities or Longmont Power) or a rural electric cooperative (like CORE Electric Cooperative), this bill does not apply to your provider.

Here is what you should do right now:

• Check your eligibility: If you have struggled with bills, see if you qualify for the Colorado LEAP (Low-Income Energy Assistance Program) right now. The income thresholds they use will likely mirror the ones used for the upcoming FARE program.
• Watch the PUC hearings: The exact number of kilowatt-hours that will qualify as a "basic need" hasn't been decided yet. The utilities will pitch a number to the PUC in 2027, and consumer advocates will likely argue it should be higher. You can submit public comments to the PUC when these rate cases open to advocate for a generous baseline allotment.

What It Means for Your Business

If you run a commercial enterprise in Colorado—whether that is a manufacturing facility, a retail storefront, or a restaurant—you already know how brutal unpredictable energy costs can be on your bottom line. When the legislature starts talking about mandating low-income residential discounts, business owners understandably get nervous about commercial rate hikes. The most critical takeaway for your business is that SB26-002 builds a firewall between this new residential discount and your commercial rates. The statutory mandate that prevents cost-shifting onto "other customers" means your business operations will not be tapped to subsidize the residential FARE program.

If you are a property manager, a landlord of a multi-family unit, or a real estate developer, this legislation offers a distinct secondary benefit. One of the primary reasons lower-income tenants fall behind on rent during peak summer and winter months is the sheer weight of unpredictable utility bills. By capping the cost of baseline electricity, the FARE program should significantly stabilize your tenants' monthly cash flow. This means fewer late rent payments, lower risk of utility shut-offs that can damage your property (like frozen pipes), and ultimately, lower turnover and eviction rates in your properties.

Here is what business owners should keep on their radar:

• Prepare your tenants: If you manage residential properties with lower-income tenants, plan to integrate information about the FARE enrollment process into your leasing packets once the program goes live in 2027. A tenant saving money on electricity is a tenant who can pay rent on time.
• Contractors, re-evaluate your pitches: If you are an HVAC installer or a solar energy contractor, be aware that a cheaper baseline electricity rate for low-income households will alter the Return on Investment (ROI) calculations for energy efficiency upgrades. If the first chunk of power is incredibly cheap, the financial payoff for installing high-efficiency appliances or solar panels in those homes stretches out significantly. You may need to adjust your sales models for certain demographics.

Follow the Money

From the perspective of the state budget, this is a remarkably inexpensive piece of legislation. According to the fiscal note, SB26-002 requires an ongoing General Fund appropriation of just $35,871 starting in FY 2026-27 (totaling roughly $43,500 when factoring in state central overhead costs). These funds are not being used to pay for anyone's electricity. Instead, the money goes to the Colorado Energy Office (CEO) to hire a part-time financial analyst (0.3 FTE).

Why does the state need a new financial analyst? Because utility math is notoriously opaque. When Xcel Energy or Black Hills Energy submits their rate proposals to the Public Utilities Commission, they will provide thousands of pages of complex accounting to justify their marginal cost rates and profit margins. The state needs dedicated experts to parse those numbers, participate in the PUC rate cases, and legally verify that the utilities are not secretly baking the costs of the FARE program back into the rate base. The actual heavy financial lifting—the millions of dollars required to subsidize this discounted power—is kept entirely off the state's balance sheet. It is funded by effectively docking the anticipated corporate profits of the state's investor-owned electric monopolies.

Where This Bill Stands

SB26-002 was introduced in the Senate on January 14, 2026, and has been assigned to the Senate Transportation & Energy Committee. The bill is sponsored by Senators Cathy Kipp and Tony Exum, along with Representative Jenny Willford in the House.

This is definitely the one to watch, as it is gearing up to be one of the fiercest lobbying battles of the session. Because the legislation explicitly targets utility profit margins to shield everyday consumers from rate hikes, you can expect Xcel Energy and Black Hills Energy to deploy significant resources to fight or heavily amend this bill. They will likely argue that legally reducing their rate of return harms their ability to attract investors, upgrade aging grid infrastructure, and transition to renewable energy. If the bill passes, the changes won't hit your bill immediately—utilities are not required to submit their FARE proposals until their first rate case filed on or after January 1, 2027. But the political fight over who ultimately pays for energy affordability is happening right now.