SmartGridCity: Did Xcel get results?

Xcel claims outcomes justify additional cost recovery

Phil Carson | Dec 15, 2011

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On Wednesday, Xcel Energy filed documents on outcomes at SmartGridCity in Boulder, Colo., that the utility argues justify additional cost recovery to the tune of at least $16.6 million.

The paperwork consists of an application for cost recovery of $16.6 million that the Colorado Public Utilities Commission disallowed earlier this year after it granted Xcel cost recovery for $27.9 million of the $44.5 million the utility sought. (The commission allowed Xcel to re-apply for cost recovery of the $16.6 million amount, if it could document the project's value to ratepayers who are footing the bill.)

Xcel's filings include testimony by multiple Xcel employees and a third-party vendor in support of the cost recovery. The vendor, MetaVu, delivered to Xcel in October a 123-page "SmartGridCity Demonstration Project Evaluation Summary."

Let me state upfront that the Colorado Public Utilities Commission, the Colorado Office of Consumer Counsel and other interested parties will weigh Xcel's application and supporting evidence. And I will bring you interviews with Xcel, MetaVu and independent sources to illuminate this case.

Appropriate cost recovery of investments in creating smarter grids is crucial to modernizing the system, and that depends on delivering value to the ratepayer who foots the bill. So it's important here to connect the evidence offered by Xcel to the criteria that the Colorado Public Utilities Commission set for further cost recovery.

As many readers know, in my view, Xcel earlier this year made a retroactive grab for SmartGridCity cost recovery after its project management mistakes led to spiraling costs. Xcel's refusal to take responsibility for sharing the cost of its mismanagement between ratepayers and shareholders has damaged its credibility and brand, in my view. (At the end of this column, I link to previous columns that detail past cost recovery efforts.) I begin my evaluation of the latest application somewhat skeptically.

Now to highlights of the current case. The application for cost recovery of the $16.6 million of SmartGridCity capital costs is reflected in the utility's Phase I rate case already filed in November. (That proceeding is Docket No. 11AL-947E.) For the current SmartGridCity cost recovery application, you'll find documents under Docket No. 11A-1001E. (Go to the Colorado Public Utilities Commission e-filing search site, enter the docket number and click on "run.")

The bar set for further recovery by the Colorado Public Utilities Commission can be summarized by two statements it made to Xcel earlier this year:

Further cost recovery would not be allowed "unless and until [Xcel] demonstrates to [the commission's] satisfaction that it has completed the unfinished aspects of the SGC project."

Specifically, the commission said, "such future application should at a minimum summarize how advisory groups are being engaged, identify smart grid investments and how such investments (or the knowledge gained) will benefit customers, and grid operations."

Xcel's application uses language designed to persuade, as it should, but it also repeats much of its logic that found little traction with the commission in past exchanges. While I will delve into the substance of its claims the text of the application does not immediately give the impression that customer and grid benefits have been well-established.

I say this because the application states that the design of the utility's distribution voltage optimization initiative is "currently [being] evaluated." Testimony is provided on "customer strategies including pricing and in-home smart device strategies." Also discussed are "certain of the 68 value propositions [tested] and what we have learned from the project to date."

"SmartGridCity is a first of a kind demonstration project ... [and] was designed to allow, and has allowed, us to make a true assessment of the feasibility and capabilities of these technologies," the application states. 

"SmartGridCity is now fully installed and is now an integral part of our distribution system in Boulder," the application states. "This enhanced distribution system is already improving the reliability of our electric service there. We are taking the lessons learned from our SmartGridCity value proposition assessment and using them to determine the cost-effective grid modernization strategies that should be applied elsewhere in our service territory." 

Another passage may offer a glimpse of Xcel's strategy of persuasion.

"Because the SmartGridCity project provides a continuing testing platform, there is still much that we expect to learn from SmartGridCity. At present there are three ongoing pilots utilizing SmartGridCity: Pricing Pilot, In-Home Smart Device Pilot and an Electric Vehicle Pilot ...

"Our intent in undertaking the SmartGridCity project was that it would provide a 'platform' that would be used to undertake testing of new technologies as they were developed; we did not view SmartGridCity as merely a mechanism to test the initial value propositions ...

"As of now, the SmartGridCity platform is fully constructed, 68 value propositions have been tested, three pilot programs are underway to test customer attitudes, and a process has been developed for expert input on additional testing that will use SmartGridCity.

"[Thus] Public Service [of Colorado, Xcel's subsidiary] is entitled to fully recover what has already been determined by the commission to be our prudently incurred capital investment ... in SmartGridCity."

The application goes to some length to discount the relevance of Boulder's vote to explore municipalization to the claimed outcomes of SmartGridCity. But it takes the opportunity to state that if Boulder forms a municipal utility, Xcel "will seek appropriate damages for the taking or damaging its distribution system in Boulder, including SmartGridCity."

We'll soon bring you more of the substance of Xcel's arguments in this case by looking at its attempt to document the value of SmartGridCity to its ratepayers and to its grid operations.

Meanwhile, below are a number of the most recent articles we've written on this nationally prominent case.

"Boulder Rejects Xcel

"Boulder Seeks Divorce from Xcel

"Public Power and Trust in Boulder

"Clash of Titans: Boulder vs. Xcel Energy

"Xcel Energy and Boulder in Conflict

"SmartGridCity's Positive Outcome

"Xcel: SmartGridCity Cost Recovery Creep?" 

"Xcel on SmartGridCity: Full Cost Recovery Now

"SmartGridCity Revisited, Again

"SmartGridCity? Regulators Cut Cost Recovery"

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

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Comments

What about the fiber network?

One of the unfortunate outcomes of Boulder's municipalization efforts is that the fiber to the curb network that Xcel installed as part of SmartGridCity will likely go dark. Boulder cannot afford to buy this infrastructure from Xcel, and Xcel will have no use for it. One irony is that should Boulder municipalize, it will have to go back to sending meter readers around to read each meter -- this after it finally has installed remote meter reading for water. If Xcel wants to get that $16.6 million back, perhaps they should explore selling the fiber network to an ISP to provide very high speed internet service to Boulder. There would be a ready market in Boulder for this service, and the competition with Comcast would be welcome. I don't know how much extra equipment would need to be installed, though perhaps it can provide each customer with Powerline service through the electric outlets. I'm assuming that's basically how Xcel wanted to connect appliances inside the house to the smart grid.