In December 2005 the Colorado Public Utilities Commission (PUC) adopted standards for net metering and interconnection, as required by Amendment 37, a renewable energy ballot initiative approved by Colorado voters in November 2004.

The PUC standards generally apply to investor-owned utilities (IOUs) with 40,000 or more customers and all electric cooperatives. Municipal utilities with 5,000 customers or more are required to adopt interconnection rules that are functionally similar to the PUC's standards (see H.B. 1160). Electric cooperatives and municipal utilities may reduce or waive any insurance requirements that apply to IOUs.

Colorado’s interconnection rules are based on the Federal Energy Regulatory Commission’s (FERC) interconnection standards for small generators, adopted in May 2005 by FERC Order 2006. Colorado's rules for interconnection include requirements, standards, and review procedures for three levels of interconnection for systems up to 10 megawatts (MW), based on system complexity.

Level 1 Interconnection

Level 1 interconnection applies to inverter-based systems with a maximum nameplate capacity of 10 kilowatts (kW). These systems must comply with the IEEE 1547 and UL 1741 standards and other applicable standards. Liability insurance with a single occurrence limit of $300,000 is required at the customer's expense.

Level 2 Interconnection

Level 2 interconnection applies to systems with a maximum capacity of 2 MW. These systems must comply with the IEEE 1547 and UL 1741 standards and must be connected to a portion of the distribution system that is subject to the utility's tariff. There are specific limitations on a single system's potential impact and the aggregate potential impact on the grid. If a proposed interconnection fails one of the various screening tests, the customer-generator may need to pay for a supplemental review by the utility. Liability insurance with a single occurrence limit of $1,000,000 is required for systems above 10 kW and up to 500 kW at the customer's expense. Systems above 500 kW and up to 2 MW must carry a $2,000,000 insurance policy.

Level 3 Interconnection

Level 3 interconnection applies to systems up to 10 MW that do not qualify for either Level 1 or Level 2 interconnection procedures. Level 3 interconnection may require studies involving project scope, feasibility, impact, and facilities. The customer may need to make a deposit and incur a portion of the total costs associated with these studies. Insurance levels will be determined on a case-by-case basis by the servicing utility.