Xcel: SmartGridCity value established

Intervenors don't agree, regulators prepare to review

Phil Carson | Jan 18, 2012

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Today we look at elements of Xcel Energy's logic for its request to recover an addition (and final) $16.6 million in its capital outlay for SmartGridCity in Boulder, Colo.

Xcel filed its application for recovery of $16.6 million in late December (on the heels of last year's recovery of $27.9 million) and today a 30-day period ends in which individuals or organizations may file for "intervention," meaning they'd like to participate in the process, largely to object to Xcel's logic.

Next week, the Colorado Public Utilities Commission will consider how it wants to handle the matter at its regular weekly meeting on Jan. 25. According to a Colorado PUC staffer, hearings are likely to be held this spring.

Readers interested in the substance of the current case can go to the PUC's e-filing system and punch in proceeding number 11-A-1001E.

While the commissioners determine how to handle this case, let's briefly look at the case file and see who's involved. In addition to its application for cost recovery, Xcel has filed testimony from six employees and provided eight exhibits (containing supporting documents or citing supporting documents) in support of the application. About a half-dozen citizens have filed comments. And the same parties involved in the original cost recovery case—Colorado's Office of Consumer Counsel, the Climax Molybdenum Co. and CF&I Steel, and citizen Leslie Glustrom—have requested participation.

A glance at the testimony filed in the case by Michael Lamb, managing director of business systems and assistant CIO, Xcel Energy Services, Inc., may provide a sense of Xcel's position. (We outlined the basic objections of the Consumer Counsel in "Smart Grid Customers: Three Developments.")

"Obviously we are aware that the commission was concerned about how our share of the project costs escalated from $15 million to approximately $45 million," Lamb said in his testimony. "We also understand that [previously] we had not completed our value proposition analysis and it was unclear how the company intended to use SmartGridCity to provide value to our system as a whole.

"We believe now that project installation is complete. We have also completed our initial value proposition analyses.

"SmartGridCity has not only provided us with a wealth of useful information that we are currently using in the development of our grid modernization approach, it is set up so that it will continue to provide us with valuable information as we test new technologies and cost-savings concepts."

In a separate portion of his testimony, Lamb stated:

"We believe SmartGridCity is a ground-breaking project that has effectively informed our grid modernization strategy and will continue to do so in the future. We believe SmartGridCity accomplished exactly what we intended to accomplish—create a living laboratory to test specific hypotheses on new technologies and concepts so that enterprise-wide deployments can be clearly business-case justified."

In the additional, detailed testimony, Lamb makes the argument that many value propositions have yielded results, some positive, some negative. I suggest that readers peruse his and other Xcel employees' testimony to form their own opinion.

In my view, Xcel is emphasizing that SmartGridCity is a testing platform and it mentions that three pilot programs remain ongoing—one on pricing, another on in-home devices and a third on plug-in electric vehicles. It prominently notes that in-home devices are nascent and PHEV penetration light, thus to date, conclusions have been difficult to reach. It also argues that Boulder's effort at municipalization has no bearing on cost recovery in the case.

We'll be paying close attention to how the Colorado PUC handles this application. I'm frankly uneasy that Xcel hasn't provided the sorts of numbers and conclusions that one would expect from a demonstration project, which would establish clear value to the customers who are footing the bill. Instead, the utility seems to be arguing that the completion of a test bed has already demonstrated which technologies employed at SmartGridCity are feasible system-wide and, therefore, it has established value to its customers.

Yet if you read the testimony, the utility suggests that, for instance, the value of advanced metering infrastructure can be justified at this point solely for its operational savings, not as a means to offer dynamic pricing programs, quantifiable demand response or other customer-side value propositions. Even if taken together with dozens of other, similarly elementary conclusions, I'd question whether that's worth $45 million to those of us footing the bill.
 
It will be fascinating to see whether the Colorado PUC agrees with that logic or whether it will hold out for the simple, clear-cut, unambiguous results that to my mind routinely emerge from demonstration projects around the country.

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

 

 

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Comments

A painful reminder...

that customers matter.  Moving forward they will matter more, and the bigger the project, the more they will matter.  Working in both the competitive and monopoly world, it is amazing how disconnected some utilities are from customers.  In the for profit world, these bad decisions would result in buyouts, bankruptcy, or massive customer churn, like the NetFlix debacle. 

In the captive customer utility world, it becomes a legal and PR exercise to rationalize the poor decisions after the fact.  I am glad Xcel was finally able to complete their value proposition analysis after the project was complete.  It is nice to start the day with a little chuckle.

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