Data Center Site Selection in Colorado: Xcel’s Large-Load Tariff, Water and Local Rules

Colorado’s grid has decarbonized quickly. Renewables supplied 39% of in-state net generation in 2023, with wind providing 70% of that, and coal’s share fell to 32% from 68% in 2010.⁹ That mix appeals to buyers with clean energy goals, but it also means new large loads arrive in a system already managing coal retirements and firm-capacity questions. Xcel’s own plans show the tension: its preferred replacement for a Pueblo coal plant includes new gas alongside renewables and storage.¹⁰

Demand is concentrated in the Denver metro, including Aurora. CBRE noted in mid-2025 that only two colocation facilities in the market offered large amounts of power and space, and that Vantage had completed a load study with Xcel Energy.¹¹ Most of the state’s policy debate is about Xcel’s service territory, so confirm the serving utility first; municipal utilities and cooperatives serve much of the rest of the state under their own terms. For regional context, see our Mountain West guide and the neighboring Utah, Wyoming and New Mexico pages.

The Colorado Public Utilities Commission (PUC) ordered Xcel Energy, which has 1.6 million customers, to create a large-load tariff because it was concerned that data center demand could raise rates. In November 2025 the PUC adopted guiding principles for customers needing 50 MW or more, including a $250,000 nonrefundable study deposit and an early-exit fee equal to 75% of the electricity the facility would have used over the contract.¹

Xcel filed its proposal in April 2026. It would create a large-load rate class for new or incremental loads above 50 MW, change how transmission costs are allocated, and require customers to sign service and interconnection agreements before Xcel counts them in its planning forecast.¹² An optional Clean Transition Tariff would let large customers buy zero-emission supply Xcel would not otherwise acquire, such as geothermal, nuclear, long-duration storage or carbon capture.¹

The state’s Utility Consumer Advocate called the filing a good framework, while CoPIRG and AARP Colorado asked that data centers pay 100% of the infrastructure built for them, with protection if a facility leaves early.¹² Clean energy groups intervened, arguing the proposal is a step in the right direction but needs improvement.² The PUC planned evidentiary hearings over several months, so treat all terms as provisional and check the docket.¹ Our large-load tariffs guide explains how deposits, minimum bills and exit fees affect a deal.

Colorado law sets an 80% cut in electric-sector emissions by 2030 and 95% by 2050, inside statewide goals of 50% by 2030 and 90% by 2050 from 2005 levels. Electricity generation is roughly a quarter of the state’s emissions, which is why the power sector carries much of the burden.⁵

Large loads are pushing the other way. Western Resource Advocates reports that Xcel’s peak demand forecast is 25% higher for 2030 and 43% higher for 2035 than in its 2021 resource plan, and that large loads could add 11,400 GWh a year of demand by 2030.⁸ Xcel says large-load customers will make up two-thirds of its new demand and require 950 MW of new generation over five years.¹

That gap shows up in resource plans. In its preferred scenarios to replace a large Pueblo coal plant, Xcel proposed mostly wind, solar and storage, but also 1.5–2.6 GW of new gas.¹⁰ Developers should expect questions about how a project’s load affects emissions, and should consider whether the Clean Transition Tariff or a power purchase agreement can match the load with new clean supply.¹

Colorado has no full regional transmission organization today, and the shape of its market is still being decided. In 2025 the PUC voted 2–1 to let Xcel spend $30 million toward joining SPP’s Markets+, a short-term wholesale market, even though the customer benefits were described as limited.¹³ On reconsideration, the PUC restored a June 2029 deadline for Xcel to join a full RTO, as SB 21-072 requires, or explain why it cannot, and said Markets+ participation does not excuse delay.¹⁴

For a site, the near-term effect is limited: Xcel still plans and builds its own transmission, and large-load terms come from the PUC tariff case, not a market rule. Over the life of a 15- or 20-year power commitment, however, a move into an RTO could change how capacity and transmission costs are allocated. Our guide to ISOs, RTOs and utility territories explains why that matters, and the SPP guide covers SPP’s large-load processes.

Colorado does not offer a data center sales tax exemption, and the 2026 attempt to create one failed. House Bill 26-1030 would have granted a 100% sales and use tax exemption for at least 20 years to data centers that invested $250 million in their first five years, created jobs paying at least 110% of the local average wage, used closed-loop or similar cooling and did not raise costs for other energy users. Its sponsor added stronger environmental terms, then asked that it be postponed indefinitely, and the House Energy and Environment Committee voted it down 11–2.³

A competing bill, SB 26-102, would have required data centers to source up to 100% of their electricity from renewables and added ratepayer and community protections; its sponsor had it postponed indefinitely. Talks on a compromise that paired incentives with rules on location, energy and water did not produce agreement, and the session ended with no change to how the state regulates data centers. The sponsor said the effort would return in 2027.⁴

Local incentives are also contested. CoreSite dropped a request for a Denver tax rebate of up to $9 million, half of its sales and use taxes, after council members raised water and power concerns during a 20-year drought.¹⁵ See our tax incentives guide and state legislation trends for comparisons.

Water is the local issue. Denver officials pressed CoreSite on water use for a 65–75 MW facility in the Elyria-Swansea neighborhood, but because the site was already zoned industrial the council had no approval vote.¹⁵ In May 2026 Denver paused new data centers for 12 months while it writes rules on land, energy and water use.⁶

Aurora chose regulation over a moratorium. Its council rejected an emergency pause and moved to create data center rules, including water standards; data centers are already reviewed under the city’s large water user guide, must show they meet performance standards for water and power, and must report water and energy use through Energy Star Portfolio Manager.¹⁶ In August 2026 the council advanced a ban on evaporative cooling and a zoning change that allows data centers in medium-industrial and business-tech zones but not mixed-use office and institutional zones; the rules apply to future projects, not those already in process.⁷

• Plan for closed-loop cooling in Aurora and expect the same question elsewhere.⁷
• Check whether the parcel’s zoning district permits data centers under new local rules.⁷
• Confirm whether Denver’s pause applies to the parcel and when it ends.⁶

Our water stress and drought risk guide covers supply questions beyond city rules.

1. 01Confirm the serving utility; in Xcel’s territory, model the PUC’s 50 MW principles and the final tariff once issued.¹
2. 02Budget for the study deposit and an exit fee tied to the contract’s full electricity use.¹
3. 03Do not assume a state sales tax exemption; the 2026 bill failed.³
4. 04Decide early how the load will be matched with clean supply, given the 2030 emissions target.⁵
5. 05Check city zoning, moratoriums and cooling rules in Denver, Aurora and the host jurisdiction.⁶⁷
6. 06Design for low water use and be ready to disclose it.¹⁶

Colorado rewards projects that arrive with firm load data, a clean supply plan and a low-water design, because each of those answers a question the PUC, the legislature and city councils have already asked. Expect public scrutiny of any incentive request and of water use, and build time for a city rulemaking into the schedule if the site is in a jurisdiction that has paused applications. If you want an independent read on a specific tract, you can get a site reviewed.