The PUC on Thursday decided on an implementation plan for the Clean Air Clean Jobs Act. Read about it here, here, and here.

So what’s next?

First, Xcel must decide if PUC’s chosen plan is acceptable. HB 1365 allows Xcel “to withdraw its application,” if it “disagrees with the Commission’s modifications to its proposed plan.”

There’s no guarantee that Xcel will approve the plan. After all, the PUC spurned Xcel’s “preferred” plan, its “recommended” plan, and its third choice. Moreover, the PUC rejected Xcel’s request to get paid up front for its investments to implement HB 1365. I don’t think the utility had intended to compromise to this extent at the outset of the proceedings, so I wouldn’t be shocked if the utility walked away from the plan (although I would be surprised).

If Xcel approves the plan, then the PUC’s decision is certain to be appealed by the Colorado Mining Association and Peabody Energy. Here are three likely grounds for litigation:

• The refusal of PUC Chairman Ron Binz and PUC Commissioner Matt Baker to recuse themselves from the proceedings

Binz and Baker were closely involved in the drafting of HB 1365, which, the coal interests have argued, is an illegal conflict of interest. In September, the Colorado Mining Association filed a motion demanding that Binz and Baker step down, but the PUC refused. Of course, Binz and Baker form a supermajority on the PUC, so they in effect absolved themselves. That is, they played the rule of defendant and judge. The CMA is certain to retry this issue before a less partial adjudicator.

• The PUC’s chosen plan was introduced halfway through the proceedings

The plan chosen by the PUC this week was one of four scenarios introduced by Xcel on October 25, almost halfway through the HB 1365 deliberations. For many parties to the proceedings, this was problematic due to the tight schedule. Normal resource acquisition dockets last years; HB 1365 compresses such a docket into months. The PUC Staff filed testimony stating that “Staff has serious procedural, due process and practicality concerns” about Xcel’s issuance of new implementation scenarios, because, “present[ing] a new fallback alternative in the late stages of an already condensed proceeding is unjustified and highly prejudicial.” Using this same reasoning, Peabody Energy filed a motion to dismiss the proceedings, which the PUC denied. Peabody is certain to try again in a state court.

• CDPHE’s Capricious Standards

Under HB 1365, the PUC must approve, deny, or modify Xcel’s proposed implementation plan by December 15, 2010, but only after the Department of Public Health and Environment (CDPHE) determines that the plan would meet “reasonably foreseeable” air quality regulations. The problem, as identified by the PUC Staff, is that “CDPHE’s failure to identify specific and independent criteria by which the plans were evaluated makes it nearly impossible to determine what exactly is required to meet “reasonably foreseeable” air quality regulation.” The CDPHE’s failure to adopt an independent criteria for evaluation creates an opportunity to argue that its decision was arbitrary, and therefore illegal.

William Yeatman is an energy policy analyst at the Competitive Enterprise Institute.