Xcel: SmartGridCity cost recovery creep?

Consumer counsel opposes maneuver to escape PUC's cap

Phil Carson | Jun 07, 2011

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It's the cost-recovery case that wouldn't die.

Xcel's efforts to recover more than the $27.9 million granted by the Colorado Public Utilities Commission (CPUC) in January from local ratepayers for its SmartGridCity (SGC) project has returned to life. This comes shortly after the utility's gambit for full, immediate cost recovery of $44.5 million was denied.

Will the utility's third try be the charm?

This time, in a May 18 filing whose impenetrable lawyer-ese and mental acrobatics around a General Rate Schedule Adjustment (GRSA) had me baffled, Xcel Energy (aka its local subsidiary, Public Service Company of Colorado) has moved to lift that cost cap by nearly $2 million.

Frankly, my initial impression from reading Xcel's filing was that the utility was merely seeking a housekeeping clarification around its GRSA. 

(Below you'll find the latest Intelligent Utility columns on the cost recovery cap. For primary documents, go to the CPUC's e-filings site, enter 10A-124E into the proceedings box and press "run.")

To explore Xcel's latest move, let's look at its filing and the response by Colorado's Office of Consumer Counsel.

As a result of its cost cap, the CPUC ordered Xcel to remove $16.5 million of capital expense relating to SmartGridCity from ratepayers' bills via a negative GRSA rider. 

Xcel argued on May 18 that this order was based on the assumption that it had already placed the $44.5 million it initially sought (and was subsequently denied) into its rate base. Further, Xcel argued that "Public Service does not currently have $44.5 million of SGC plant-in-service in rate base" ... [it] has only $39.3 million SGC plant-in-service as a result of its last rate case, Docket No. 09AL-299E.

"In complying with the orders in that docket, [Xcel] calculated a 13-month average of the Smart Grid investment through Dec. 31, 2010 and inadvertently allocated only 90 percent of the company's SGC capital investment to its retail customers, rather than 100 percent."

Secondly, Xcel argued, it needed clarification of whether it is also entitled to recover the financing cost associated with the capital investment, known as "Allowance for Funds Used During Construction," or AFUDC. Adding the AFUDC to the capital amount—which Xcel characterized as "common regulatory practice"—would lead to the utility's cost recovery of $29.8 million. With some additional acrobatics, Xcel argued that that would lead to a negative GRSA rider of $9.5 million, not $16.5 million.

So Xcel is arguing that it inadvertently didn't bill customers for 10 percent of its SGC costs and also now wants to add financing costs.

On June 1, Colorado's Office of Consumer Counsel (OCC) weighed in.

Xcel's argument presumes to reinterpret the intent and rationale of the commission's previous decisions to limit present cost recovery for SGC to $27.9 million, the OCC counter-argued. "However, such presumptions are not supported by the commission's prior decisions."

Xcel's motion to amend the commission's final decision in this case—a "joint motion" because it (inexplicably, to me) is supported by the CPUC's staff—should be denied, according to the OCC's filing, because:

  • Xcel's motion is "procedurally and legally improper." Such arguments belong to a Rehearing, Reargument or Reconsideration (RRR), which was requested and denied.
  • Xcel's request for further recovery is inappropriate as it has the ability to return to seek additional recovery, upon proof of tangible value to ratepayers from SGC's results.
  • The OCC's recommended cost cap of $27.9 was intended as a hard cap, inclusive of AFUDC, a position adopted by the CPUC.
  • The CPUC's decision to cap cost recovery was "meant to be punitive because of widespread disappointment with the project and massive cost overruns," the OCC wrote. "The commission did not believe that the project had achieved its stated objectives or fulfilled its stated promises. The limit on cost recovery was therefore meant to put the company's shareholders at risk for some of the massive cost overruns due to the company's poor performance. [Xcel's motion] simply seeks to claw back some of this punitive disallowance."

 

In my view, Xcel's position here is "a little too little, a little too late." As with its request for an RRR, it amounts to overreach, which only hurts this utility's reputation and brand. Why in this case Xcel would further damage itself for less than $2 million is beyond me.

I look forward to the opportunity, coming soon, to report on more positive aspects of Xcel's business. This is not one of them.

"Xcel on SmartGridCity: Full Cost Recovery Now" 

"SmartGridCity Revisited, Again"

"SmartGridCity Cost Cap Revisited"

"SmartGridCity? Regulators Cut Cost Recovery"

Phil Carson
Editor-in-chief
Intelligent Utility Daily
pcarson@energycentral.com
303-228-4757

 

 

 

 

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