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Smart Grid City: Suddenly, the PUC Cares about Costs?

The PUC has finally ruled on Xcel’s cost-recovery for the Boulder Smart Grid City (SGC).

Before we get to that, here’s a timeline of the SGC, for background:

  • 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.
  • Winter 2009: Xcel issued its first official estimate of SGC costs: 15.3 million.
  • May 2009: 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”), which is essentially a PUC-certification that the project is in the public interest, and therefore entitled to full cost-recovery.
  • 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.
  • January 2011: The PUC rejected the Settlement Agreement, and limited Xcel’s cost recovery to $27.9 million.

As is noted in the timeline above, the PUC in December basically agreed to give Xcel full cost recovery. Why did the PUC change its mind, and reject the Settlement Agreement reached by its staff by reducing Xcel’s cost recovery by almost $18 million?

The answer is that it was swayed by the Office of Consumer Counsel. You can read the OCC’s case here, but in a nutshell, it argued that the SGC became an imprudent investment in May 2009, when Xcel first raised its cost estimate to $27.9 million. At that time, according to the OCC, Xcel should have reduced the scope of SGC instead of proceeding with the project as originally designed. The OCC’s “smoking gun” was a March 2009 presentation on SGC given by an Xcel executive, in which he conceded that further cost overruns were likely. In light of the fact that Xcel knew SGC risked further overruns, the OCC asserted that continuing with the project was imprudent, and therefore unworthy of full cost-recovery. It recommended a cost cap set at $27.9 million, and the PUC agreed.

My Thoughts:

  • I think “Smart Grid” is a boondoggle, so I’m unconvinced that limiting Xcel’s cost-recovery to “only” $30 million is a victory for ratepayers, as was claimed by the Denver Post.
  • Where the heck was this OCC during HB 1365 deliberations? From the start of the SGC proceedings, the OCC tenaciously fought Xcel, and it ultimately won. But during HB 1365 deliberations, the OCC was supine.
  • For that matter, why is it that the Colorado media got riled up over $18 million in cost overruns for SGC, but no one seems to care about the $billion+ price tag of HB 1365, which was proposed and written by big business?

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