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Primer for Forthcoming PUC Decision on Boulder’s Smart Grid City

As the Denver Post’s Mark Jaffe noted, sometime soon the PUC is expected to make a major ruling on Boulder’s Smart Grid City (“SCG”), a pilot project for so-called “smart grid” technologies that has been much maligned for costing Xcel three times what the utility had initially estimated.

Specifically, the PUC will rule on a recommended decision by administrative law judge G. Harris Adams that approved a Settlement Agreement reached by Xcel, the PUC staff, and the Governor’s Energy Office on August 27. According to the terms of the SA, Xcel can recoup $44.5 million (about $30 million more than originally proposed) from Colorado ratepayers, but beyond this number, Xcel shareholders must pay.

Here’s a quick timeline of the SGC:

  • January 2008: Xcel announced it was looking for a city of 100,000 in its eight-state territory as a test bed for smart grid.
  • March 2008: Xcel chooses Boulder. The utility claimed that the project would cost $100 million, but that a consortium would share the costs. Xcel’s Smart Grid Consortium partners included Accenture, Current Group, GridPoint, OSI Soft, Schweitzer Engineering Laboratories and Ventyx. The utility suggested repeatedly that SGC wouldn’t necessitate cost-recovery through Colorado rate-payers, although it did not rule out that possibility.
  • Winter 2009: In Docket No. 08-520E, Xcel issued its first official estimate of SGC costs: 15.3 million.
  • May 2009: At outset of Docket No. 09AL-299E, Xcel revised its SCG cost estimate upwards to $27.9 million.
  • November 2009: Xcel again increased its SGC cost estimate, to $42.1 million. It reached a Settlement Agreement with PUC Staff that allows the utility to recoup this money from ratepayers.
  • December 2009: The PUC approved the Settlement Agreement, although it required Xcel to seek to a Certificate of Public Convenience and Necessity (“CPCN”). If Xcel failed to obtain a CPCN in a future proceeding before the PUC, then it might have to return the SGC cost-recovery that it had collected in the interim.
  • March 2010: Xcel filed for a CPCN.
  • August 2010: Xcel reached a new Settlement Agreement with PUC Staff, placing a cap on SGC cost-recovery from Xcel ratepayers at $44.5 million and allowing for the CPCN.
  • October 2010: Administrative law Judge G. Harris Adams recommended that the PUC adopt the August 2010 Settlement Agreement.

Here are some bullet point thoughts about this decision:

  • As I’ve noted here, I believe that Smart Grid is a boondoggle.
  • That said, the cost-overruns are not primarily Xcel’s fault. Rather, it was the city of Boulder that unexpectedly required the utility to bury the smart grid infrastructure, which caused much of the cost increases.
  • According to Xcel and the PUC Staff, the benefits of SGC are not tangible assets (in the “used and useful” sense, but rather are intangible—namely, knowledge. While I agree that the detailed electricity demand knowledge afforded by SGC is indeed valuable, I doubt it’s worth $40 million.
  • Is the SGC an indictment of smart grid technology? After all, it cost Xcel more than $40 million to outfit 1.5% of its customers with so-called “smart” meters. Does it make sense to take these costs statewide?
  • It should be noted that smart grid is a component of Xcel’s ill-defined and legislatively-mandated “demand side management” program that is supposed to engender significant increases in energy efficiency (and this lower electricity consumption). In fact, demand-side management successes are incorporated into resource acquisition models. Is this realistic?

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